The satisfaction of mortgage is a legal term for an official record showing that a mortgage has been paid off on a property. Generally, if you have a mortgage and pay it off, the lender will issue a letter of satisfaction and file it at your local land records office. It's a good idea to make sure this happens since it can be a hassle later on if you go to sell or take out another mortgage and the mortgage form isn't all in order.
Satisfaction of mortgage is an official document saying a mortgage loan has been paid off and the lender no longer has a lien on the property.
How Mortgages Work
Generally, in most states, if there is a mortgage on a property, the lender holds what is called a lien on the property, which means that if the property is sold, the lender will get paid from the proceeds of the sale. If you do not pay your mortgage according to the terms, the lender can foreclose on the property, forcing it to be sold to pay off your debt.
Someone who owns a mortgaged piece of property agrees to pay off what they borrowed over the life of the loan. Mortgages can last 15 years, 30 years or even longer, and some have fixed interest rates while others adjust over the life of the loan. Either way, at some point the mortgage can be paid off, and the property owner no longer owes anything to the lender.
Maintaining Property Records
Property ownership, including liens and similar issues with the property, is a matter of public record in most states. When a property changes hands, is mortgaged or a lien is added or removed, that must be recorded in a public place. The name of the office that records information about properties varies from place-to-place, as does whether records are handled by the municipality, county or some other level of government.
But usually, documents are filed, often for a fee, in an official registry in a legal jurisdiction where the property is located. In some cases, you can access copies of these documents online, and you can usually access them in person by visiting the office where they're stored.
Nevertheless, it's a good idea to make sure that records about your property are accurate and up-to-date. If you need to sell your property or take out a mortgage, you may have difficulties if records stating who has an interest in the property are inaccurate.
Satisfaction of Mortgage
When your mortgage is paid off, the lender or company that services the mortgage will issue a formal legal document, typically notarized, known as the satisfaction of mortgage. This document is filed at the local property records office and counts as proof that the mortgage is paid off. You may receive other documents from the lender, as well.
Many states require a lender to file the satisfaction of mortgage promptly, within a certain number of days. You can work with the lender and your records office to verify this happened. If your lender fails to record the document and time passes before you receive notice, it may be harder for the company to verify in its records when the loan was paid off, leading to a further delay.
If your lender has gone out of business without recording the satisfaction of mortgage after your loan was paid off, you can contact the Federal Deposit Insurance Corporation for assistance. The FDIC can either issue the satisfaction of mortgage document itself or, if your bank was purchased, work with a bank that bought your bank to assist you.