A mortgage occurs when a property is offered by its owner to a lender (usually a bank) as security for a loan. The owners of the property offering the security are called mortgagors and the lender accepting the security is called the mortgagee. The mortgagee registers its mortgage on the title, this gives the lender as mortgagee the right to take possession of the property (and even sell it) if the borrower defaults on their loan.
Borrowers often refer to their loan as their “mortgage”, but a mortgage is not a loan – a mortgage secures a loan.
When you sell a property subject to a mortgage, the mortgage must generally be discharged at settlement so that the purchaser can receive an unencumbered title. The mortgagee (the lending bank) will discharge its mortgage if either the loan or loans secured by the mortgage are paid off at settlement, or alternatively if another security is offered to the lender in substitution for the property being released.
Contact Glenferrie Conveyancing for more information.