The process to follow is not the same in all countries. Perhaps it may be easier to explain it with an example.
Lets put the case that you have a pending balance at our mortgage of 50.000,00 €. You then decide that you would like to payoff in one go. Then the first thing to do would be to send a bank transfer to the mortgage’s bank account. Once this is done, we advice to require the bank to prepare a standard private full payment confirmation letter called “certificate of mortgage economic cancellation”.
Then, next step would be to make sure that the bank signs public recognition of the mortgage’s full payment. The standard way of doing this is by signing a deed of Mortgage Cancellation before a Public Notary. This is very important. Your mortgage is registered at the Land Register where the only documents that can be registered are public documents, documents like public deeds. Once the mortgage deed is signed in the way required, then the next step will be to register the deed and get the Land Register to acknowledge that the mortgage has been paid off. Once the cancellation deed is submitted what the Register does is to unregister the mortgage meaning in reality to just erase it from the information associated to your property.
Upon this, it is possible to apply for Land Register’s information in relation to your property where you should not find any mention to the mortgage. It should be gone, erased. The Register provides this information by issuing a document called “nota simple” (perhaps you have heard about this before).
The problem here is that many banks at this stage become not very communicative. A mortgage is a good business for a bank and they are not very happy to loose it. Banks – with some exception – become extremely slow and have, mainly in the case of the biggest banks, such a dense bureaucracy that becomes really a difficult task to move papers from one internal department to the next one until all is organized to sign the public deed of mortgage cancellation. Naturally this takes quite a good amount of time and efforts.
So the process could be divided in 5 stages: (1) Payment of the last lump sum, studying in advance if there is any penalty to be added for “early redemption”. (2) Obtaining the bank’s certificate of mortgage economic cancellation. (3) Follow up the process until the designation of the bank’s representative that will sign a mortgage cancellation public deed, deed that is prepared by us before hand. (4)- Submit the deed to the Land Register for its registration. (5) Follow up the process of registration until fully registered, obtaining the formal evidence of the mortgage full cancellation and erasing.
ABOUT COSTS AND EXPENSES
We could summarize the approximated costs of mortgage cancellation process as follows:
– Notary fees: 450,00 € – 550,00 €.
– Land register fees: 350,00 € – 450,00 €.
– Tax: Stamp Duty (currently tax exempted).
– Many banks charge a service fee when providing a legal representative to sign the mortgage cancellation deed. Perhaps this last drop may seem unnecessary being this is the only legal way to have the mortgage formally cancelled. Since in fact it’s not a new service but the natural consequence of a contract’s fulfilment (I refer to the loan contract with mortgage guarantee, commonly called just mortgage), perhaps clients should not be asked to pay this small but unexpected fee. The usual fee charged is 100.00 € (one hundred) plus VAT.
We at Criado & Kraus would be pleased to assist you cancelling your mortgage.
Our service includes:
– Obtaining the certificate of the mortgage’s economic cancellation upon its full and final payment.
– Drafting the Public deed of mortgage cancellation.
– Coordinate the appointment for the bank’s representative signing of the public deed before the Notary.
– Liquidation of taxes (though these deeds are legally exempted for the payment of the Stamp Duty its still necessary to file the tax form).
– Follow up of the process of the deed’s registration at the Land Register until full registration. Payment of the Register’s duties and collection of the deed.
– Providing evidence of the mortgage’s clearance at client’s property through a “nota simple” from the land register.
Should we lend you a hand with this, please don’t hesitate to contact me.
Jose Francisco Criado Sanchez
Abogado – Solicitor
Criado & Kraus