When you buy a home, the seller probably still has a loan on it, which has to be cleared before your sale can go through. This means releasing the lien the lender has on the property to free the home up for a new owner. The reconveyance fee covers any administrative fees attached to having the lien released through the local municipality and putting in the name of the new owner.
TL;DR (Too Long; Didn't Read)
A loan reconveyance fee is charged during closing to remove the current lien, usually from the lender that financed the seller, on a property so that the buyer can purchase it.
Reconveyance Fee Definition
The deed is an important part of the closing process, making the owner of a piece of property official. This document is filed with local authorities – usually the county clerk, registrar or county recorder. To cover its administrative costs, government authorities demand fees for these transactions, and those fees are passed on, typically as part of the seller’s closing costs.
The reconveyance fee the seller pays will be enough to cover the charges for recording the mortgage and deed, and those costs can vary. Generally, you can expect to pay between $50 and $65. If you want to know the exact amount you’ll be charged at closing, you can ask your real estate agent. But if you want to know if you’re being overcharged, the local office that handles deed transfers should be able to tell you what their administrative fees are for the service.
How Reconveyance Fees Are Charged
Once you’ve established the reconveyance fee definition, you’ll be ready to look for it at the closing table. However, in the stacks of paperwork, it could be a little tough to find. Sellers will sometimes find that the reconveyance fee is wrapped up in the title insurance fee. In that case, you’ll need to ask the person handling your closing for a breakdown of that category.
Although charges to cover recording the mortgage and deed may not be a large part of the closing costs, it’s important to make sure the reconveyance was completed. If the deed is not transferred properly, that lien could remain on the paperwork, complicating things later.
Reconveyance Fees and Refinancing
Although the official reconveyance fee definition may cover removing the old lender’s lien on the deed, it still comes into play if you’re refinancing. But even if you’re refinancing with the same lender, you may find a reconveyance fee on the list of costs you can expect to pay. The fee covers the administrative paperwork to make sure the deed has up-to-date information on the lien the lender has on the property.
Although there are many other fees associated with refinancing, the good news is that not all closing processes demand fees as they did the first time around. You may not have to pay homeowner’s insurance fees, for instance, if you can demonstrate proof that your home already has the required minimum coverage.
Mortgage Payoff and Reconveyance
The charges to cover recording the mortgage and deed take on a different nature if you own the home outright. As soon as you make that final mortgage payment, your lender is required to file a full reconveyance with the local jurisdiction. This will remove their lien from the property and free you up to sell the property someday without having to deal with that part of it.
Along with determining what closing processes will demand fees, it’s very important to look out for your interests when it comes to reconveyance. If you pay off your loan and your lender doesn’t take this step, you’ll have difficulty proving yourself as the owner of that home. Your lender should be on top of it, though, as failure to do so can lead to stiff statutory penalties.
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.