Need a mortgage discharge? Learn what it is and how to get it.

Are you going to hire a new home loan or transfer your? You've come to the right place: the credit intermediaries from Poupança no Minuto can help you with all related questions and move forward with your process in a minute. To better understand this specific issue about mortgage termination, keep reading the article.

Firstly, what is a mortgage prepayment?  

The release is a document related to the settlement of a mortgage. That is, when a home loan debt is paid off, the bank issues the release as proof that the creditor has settled it.  

By issuing the discharge, the bank loses rights over the mortgaged property, once the mortgage registration is cancelled in the Land Registry.

What is the purpose of this document?

When obtaining a mortgage, the owner still keeps the property, but the ownership is mortgaged to a banking institution, meaning that the institution holds the rights to the property.

As you pay the monthly installments of the loan to the bank, the property is mortgaged to the bank for the purpose of serving as a guarantee in case of default.

So, the goal of issuing a distraint is to cancel the mortgage constituted in favor of the bank, which automatically loses rights over the property. This document then states that the debt has been settled and the mortgage ends.  

In what situations do I need a mortgage discharge?

The mortgage discharge is issued whenever the debt is settled, which can happen in the following situations:  

• Payment of the full housing loan, in case of end of repayment term or early repayment;  
• Mortgage transfer, you must request it from your current bank to submit it to the bank entity to which you will transfer the loan; 
• Sale of the mortgaged property, as it will pay off the loan, it is necessary to deliver the mortgage release at the deed.

How to obtain the mortgage discharge?

You can request for discharging, or cancellation of mortgage, online on the Property Registry platform, or in person at a bank branch where the loan belongs.

As for deadlines, in the case of selling the house, the notary or lawyer who carries out the deed must cancel the mortgage within 10 days. In the case of selling to buy another property also with a housing loan, the deadline of 10 days remains for cancelling the mortgage by the lawyer, notary, or solicitor who carries out the deed.

In addition, with a minimum of 10 days prior to the sale of the property, you must inform the bank that the property will be sold and the date on which the deed will take place.

This document must be included in the deed, as well as a bank representative to deliver it.

If you need to terminate the loan, not in the case of sale, the deadlines are different. In this case, the termination must be issued within 14 working days after the end of the contract, and the mortgage canceled in the land registry within 30 days by the owner.

Is it expensive to request the rescission?

No, the issuance of the dissolution does not have costs currently. However, before 2021 some banks charged a commission to issue the dissolution, even though there were rules in effect that determined the document's gratuity.  

But with Law No. 57/2020, of August 28, in force since January 1, 2021, it became illegal for banks to charge for issuing the mortgage discharge. Whether in the case of termination of the contract by total early repayment or by termination of the repayment period of the contract.

This law determines that banks must send the request for loan termination within a maximum period of 14 days, "cannot charge commissions for this act".

Process became simpler with APB protocol  

Currently, there is the protocol of the Portuguese Banking Association (APB), among almost all banks, which facilitates the process of canceling mortgages. This requires that a new mortgage be constituted in favor of a different bank than the one canceling the current mortgage.  

Therefore, by applying the APB protocol, the seller can go to the bank where the current mortgage is established to request the Authorization Term, signed and stamped. Then, this document must be passed on to the buyer, who must deliver it to the bank where they will get their housing credit.  

If it is a credit transfer, the same person must request the Authorization Form and deliver it to the new bank to which the mortgage will be transferred.

What the APB protocol allows is, after signing the Promise to Purchase and Sale Agreement and before the deed, the sending of an internal message (called SWIFT code) from the bank that will cancel the mortgage to the bank that will constitute a new mortgage.  

This code aims to consult the mortgage cancellation term, used for formalizing the process. It is in this communication that banks inform each other about the outstanding amount and the amount to be paid in the deed.  

Let's move forward with the help you need? Clarify your doubts and feel accompanied throughout your credit process, with the credit intermediaries of Poupança no Minuto.