Definition
A Deed of Reconveyance is a legal document that transfers the title of a property from a trustee back to the borrower after a mortgage has been fully paid off. Basically, it’s an official record that the borrower has completely paid his/her mortgage and now fully owns the property. It is commonly used in states that employ trust deed sales.
Phonetic
The phonetics of “Deed Of Reconveyance” are: deed (dēd) of (əv) re-con-vey-ance (ˌrē-kən-ˈvā-ən(t)s).
Key Takeaways
- Release of Mortgage Lien: A Deed of Reconveyance is used when a mortgage loan is fully paid off. It transfers the title of real property back to the borrower from the trustee to signify that the borrower has fulfilled their obligation, thereby releasing them from the mortgage lien.
- Document’s Signatures: The Trustee, who is usually the lender or a representative, signs the Deed of Reconveyance. This document typically does not require the borrower’s signature. However, it is usually notarized to ensure its legality and authenticity.
- Recording and Safeguarding: Once the Deed of Reconveyance has been signed, it must be recorded in the county where the property is located. This formalizes the transfer of the property title. It is important for borrowers to keep a copy of the Deed of Reconveyance for their records as proof that they have paid off the loan and now have full ownership rights to the property.
Importance
A Deed of Reconveyance is an important document in the business/finance realm as it signifies the completion of a mortgage payment by the borrower. Essentially, it is proof that the borrower has fully paid off their mortgage loan, thereby making them the complete owner of the property unencumbered by the loan. The lending institution releases the lien held on the property back to the borrower through this deed. Without a Deed of Reconveyance, a borrower’s ownership may be questioned since there’s no official document indicating that they have repaid their mortgage fully. Therefore, it is paramount for ensuring a clear title and avoiding future complications regarding property ownership.
Explanation
The Deed of Reconveyance primarily serves to officially clear the borrower’s title to the property in question, releasing them from a previously existing mortgage or lien. This occurs when a borrower has successfully fulfilled their mortgage obligations. A Deed of Reconveyance is prepared by a trustee—which is generally a title company—that has been holding the title for the property on the lender’s behalf. Essentially, it is a document which certifies that the borrower has fully repaid their debt, and the lender no longer has a claim to the property.
The utilization of the Deed of Reconveyance is imperative in any mortgage payment process as it acts as a legal verification of the borrower’s total fulfillment of their financial responsibility towards the property. It evidences that the lender has relinquished all rights, thereby facilitating the return of clear ownership rights to the borrower. So, for any homeowner who has fully paid their mortgage, this document becomes essential, as it’s the official instrument that allows the return of the property’s deed back to them, signifying that they now completely own their property free and clear.
Examples
1. A Homeowner Paying Off a Mortgage: When a homeowner fulfills their mortgage payments, the respective bank or lender typically issues a Deed of Reconveyance. This document signifies that the borrower has fully paid their mortgage and the lender no longer has interest in the property. Now, the property is completely owned by the borrower, and they hold full rights over the same.
2. A Business Property Mortgage: Consider a business that takes out a mortgage to buy a property for its operations. After finishing the payments on the business loan, the lending entity returns the rights to the purchased property through a Deed of Reconveyance. This provides proof that the business has repaid the loan in full and that the lender no longer holds any claims toward the property.
3. Property Sold to Clear Debt: Assume an individual sells their home to clear off their outstanding debts. If they previously had a mortgage on the property, the lender preparing the Deed of Reconveyance can directly transfer the property rights to the new owner once the remaining mortgage balance is fully paid. This eliminates the step of transferring rights back to the original owner, streamlining the property sale process.
Frequently Asked Questions(FAQ)
What is a Deed of Reconveyance?
A Deed of Reconveyance is a legal document that transfers the title of a property from a trustee back to the borrower (mortgagor) after they have fully paid their mortgage debt.
When is a Deed of Reconveyance used?
A Deed of Reconveyance is used when a borrower completes payment of their mortgage. The trustee is then required to execute this document to release the lien on the property.
Who prepares and records the Deed of Reconveyance?
The trustee or the mortgage lender typically prepares the Deed of Reconveyance. Once prepared, it is officially recorded in the county where the property is located.
How long does it take for a Deed of Reconveyance to be filed?
The exact timing may vary, but it generally takes about 30 days from the final mortgage payment for the Deed of Reconveyance to be filed.
Can a Deed of Reconveyance get lost?
Yes. The document may get lost, misplaced, or not filed properly. If this happens, a borrower can request a Substitution of Trustee and Full Reconveyance as an alternative.
What happens if a Deed of Reconveyance is not filed?
If a Deed of Reconveyance is not filed, the borrower does not legally own the property, free and clear. This can cause issues if the borrower attempts to sell or refinance the property.
Does a Deed of Reconveyance need to be notarized?
Yes. A public notary needs to witness the signing of the Deed of Reconveyance to authenticate the document.
Can I have a copy of my Deed of Reconveyance?
Yes. Once the Deed of Reconveyance is recorded at the county recorder’s office, you should receive a copy for your records. Always confirm with your lender or trustee about this.
What information is included in the Deed of Reconveyance?
A Deed of Reconveyance typically includes the property’s legal description, the name of the borrower (mortgagor), and the name of the trustee along with the statement of the loan repayment.
Related Finance Terms
- Mortgage: A legal agreement by which a bank or other creditor lends money at interest in exchange for taking the title of the debtor’s property.
- Promissory Note: A written agreement to repay a debt in certain way (in specified amount, under specified terms), usually involving payment of interest.
- Lien: A legal right or claim upon a specific property which is made to secure the payment of a debt or performance of some other obligation.
- Loan Satisfaction: The situation when a debtor has fully paid a debt, including any associated interest and fees.
- Real Estate Ownership Transfer: The process by which the ownership of a property is transferred from one person to another.
