What Is a Deed of Reconveyance?
Let me explain what a deed of reconveyance is—it's a legal document that transfers the title of a property from your mortgage lender back to you, the borrower, once you've fully paid off the loan. You need to record this deed in your local county office to ensure you can sell the house without issues later on.
Key Takeaways
Here's what you should know: a deed of reconveyance gets issued when your mortgage is paid in full. It confirms that the title has shifted from the lender to you. If you don't record it properly in the local county or recorder's office, you'll run into trouble trying to sell your home.
How a Deed of Reconveyance Works
Once you've paid off your mortgage loan completely, the lender issues you a deed of reconveyance. They create the document, notarize it, add a legal description of your property, and record it in the local county. Any title search on the property will then show the lien is satisfied, meaning you're no longer at risk of foreclosure.
Remember, a deed of trust is the agreement where you, as the home buyer, promise to repay the loan, and the lender holds the legal title until it's paid. When there's a lien on the property, you can't sell it outright, but if you're selling and using the proceeds to pay off the mortgage, the deed of reconveyance gets recorded during closing, often handled by a title insurance company.
If you're refinancing with a new mortgage, you'll get a deed of reconveyance for the old one, showing it was paid off. For second mortgages or home equity loans, those give the lender a security interest in your home as collateral, and they can foreclose if you default—the reconveyance for the first mortgage doesn't affect or protect you from that.
These deeds vary by state or lender. In states using trust deeds instead of mortgages, a trustee holds the mortgage for the lender. Some places use satisfaction of mortgage documents instead, but they do the same job.
What's Included in a Deed of Reconveyance?
You can expect a deed of reconveyance to cover several key elements to make it official.
Elements in a Deed of Reconveyance
- The name and address of you, the homeowner or mortgage borrower.
- The name of the lender or trustee.
- A description of the property and its parcel number from the original deed.
- Documentation proving you've fulfilled your obligation to the lender, so the property now belongs to you.
- Lines for signatures from all parties and a notary section to confirm they witnessed the signing.
Example of Deed of Reconveyance
Suppose you buy a house and take out a $400,000 mortgage from a bank, with the property as collateral under a deed of trust. Once you pay off the entire loan, the lender certifies the debt is cleared and creates the deed of reconveyance, typically within a few weeks. This document states the mortgage is paid in full and that you now have the title and full ownership of the property.
Frequently Asked Questions
What Is the Difference Between Security Interest and Deed of Reconveyance? The lender holds a security interest in your home while the mortgage is active, allowing them to foreclose, evict you, and take possession if you default. The deed of reconveyance shows they no longer have that interest, so you can't be foreclosed on by them, and they can transfer the clear title anytime.
What if the Deed of Reconveyance Is Not Filed or Filed Improperly? If it's not recorded or has errors at the recorder’s office, like your local county courthouse, it causes a title issue. The deed of trust stays as a burden, making it hard for you to sell the home.
Can a Homeowner Face Foreclosure With a Deed of Reconveyance? Yes, you could still face foreclosure from the local government if you don't pay property taxes on time. In states with nonjudicial foreclosure, this can start with just a written notice, no court involved. The deed doesn't protect against unpaid taxes.
What Is the Difference Between Conveyance and Reconveyance? Conveyance is transferring property ownership from one party to another, with a deed describing the parties and property. For reconveyance, the lender holding the title issues the deed to transfer it back to you, the borrower.
The Bottom Line
In summary, a deed of reconveyance transfers the property title from the bank or mortgage holder back to you once the mortgage is satisfied. It removes the lender from the title, and you need to have it completed, signed by the lender, and filed with the local recording office, such as the county courthouse.
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