Things you need to know about Cancellation of Real Estate Mortgage.
1. What is a Cancellation of Real Estate Mortgage?
A Cancellation of Real Estate Mortgage is a creditor’s (the “mortgagee”) declaration cancelling the real estate mortgage executed in his favor by the debtor (the “mortgagor”) over certain immovable property. Generally immovable property is defined as follows:
- Immovable by nature or those which cannot be moved from one place (i.e. land, roads).
- Immovable by incorporation or those which are attached to an immovable in a fixed manner as to form an integral part thereof. Examples are buildings, walls, fences, trees, statues, animal houses, machinery installed in a building to meet the needs of an industry in the building and docks on a river.
- Immovable by destination or those which are placed in an immovable for the use of such immovable. (i.e. machinery in a factory).
- Immovable by analogy or those which are considered immovable by operation of law because it is regarded as united to the property.
Once the mortgage is cancelled the property is no longer considered as security for the debt and the mortgagee cannot foreclose the property.
2. When do you need a Cancellation of Real Estate Mortgage?
A Cancellation of Real Estate Mortgage is used when the parties agree to cancel the mortgage over certain immovable property. It is often used when the principal obligation secured by the mortgage has been fulfilled, cancelled or is no longer existing for any reason.
A Cancellation of Real Estate Mortgage may also be used when the parties agree to replace the current property with another property. This will involve cancelling the mortgage over the existing property and executing another mortgage over the new property. In any event the parties are free to cancel the mortgage for any reason.
3. How can a Cancellation of Real Estate Mortgage protect you?
A Cancellation of Real Estate Mortgage protects the mortgagor by putting in writing the fact that the mortgage over his property has been cancelled and can no longer be foreclosed. Otherwise, there is a continuing risk the property will be foreclosed despite the fact there is no valid reason for the foreclosure anymore.
Further, an existing mortgage adversely affects the property’s value and how 3rd persons treat the property in business transactions. For example, a potential buyer will be more apprehensive about buying the property if there’s an existing mortgage over the same. This is especially true if the mortgage is annotated on the Certificate of Title of the property.
In certain cases, the Register of Deeds will require the mortgagor to present a document from the mortgagee cancelling the mortgage before removing the mortgage’s annotation on the Certificate of Title. A Cancellation of Real Estate Mortgage can serve this purpose.
4. What information do you need to create a Cancellation of Real Estate Mortgage?
To create your Cancellation of Real Estate Mortgage, you’ll need the following minimum information:
- The type of mortgagee (i.e. individual or business) as well as name and details (i.e. nationality and address)
- The mortgagor’s name
- Brief description of the property mortgaged (i.e. type of property, address)