What Do I Need To Tell My Bank When Selling My House?

We all dream of owning our home freehold, but the reality is that most of us will have a mortgage on our property for many years.

This means that the lender providing the mortgage owns a portion of our home, so if we decide to sell the property, we need to notify that lender of our intention.

This is usually a fairly simple process, unless you have complex lending arrangements in place.

The first step is to fill in a Discharge of Mortgage form. This document tells the lender that you plan to sell the property and pay back the remaining debt and can usually be found on your bank or lender’s website, or you can contact them and ask for it to be sent to you.

This form will ask for details including the borrower’s name, the guarantor details if applicable, the conveyancer you will be using, and the mortgage account number.

Completing and submitting this form gives your bank permission to start the process of discharging your mortgage. The lender will then calculate any fees and charges and provide a final payout figure to your conveyancer to be paid at settlement. This amount will be taken out of the proceeds of your sale price.

The lender will also register the discharge of the mortgage with Land Services SA, or the equivalent body if the property is outside of South Australia. Once the discharge of the mortgage has been registered, the property is free of any encumbrance, a legal term for any restrictions that may prevent a sale. 

You will need to allow for discharge fees which can range in cost, depending on your lender. If you have a fixed rate mortgage, there may also be break costs involved.

Some lenders offer mortgage ‘portability’ so if you are selling your home and purchasing another property, you may be able to simply transfer your mortgage to the new property. If you wish to do this, we recommend speaking with your lender before starting the process of selling your home. If your mortgage is not portable, you may need to arrange bridging finance instead. Alternatively, you may choose to make an offer on the new property which is conditional on the sale of your current home.

In most cases, the proceeds from the sale of your home will be enough to pay off your mortgage. However, in some circumstances you may find there is a shortfall. If your property sells for less than the amount you owe, you will need to find the difference from your personal savings or through selling other assets. If you cannot make up the shortfall, your lender will ask your mortgage insurer to cover the difference, and the mortgage insurer will then attempt to recover the outstanding debt from you.

Depending on your lender, it can take between 14 and 28 days for a mortgage to be discharged, so it is important to allow adequate time for this, and of course you will need to continue making mortgage repayments until settlement occurs.

While the process is reasonably simple, there can be complexities depending on your individual circumstances. The best way to sell your property without stress is to engage a Certified Practising Conveyancer to guide you.

We would be delighted to answer any questions you may have and provide you with a cost estimate for your conveyancing need, so please get in touch today for a confidential and obligation-free chat.