What Is a Deed of Release?

What Is a Deed of Release?

Let me explain what a deed of release is—it's a legal document that removes a previous claim on an asset and provides documentation of release from a binding agreement. You'll often see it when a lender transfers the title of real estate to the homeowner after the mortgage is satisfied. Essentially, it releases the parties from previous obligations.

Key Takeaways

A deed of release literally releases the parties from previous obligations, such as payments under a mortgage once the loan is paid off. The lender holds the title to real property until the mortgage terms are satisfied, which is when this deed commonly comes into play. It can also free an employer and employee from obligations under their employment agreement, like in a severance package. Additionally, these forms can relieve personal guarantee obligations for business loans.

How Do Deeds of Release Work?

To understand how a deed of release works, consider a common situation: buying a home. Most people get a mortgage from a financial institution, and the bank doesn't just lend the money—it takes a legal claim against the house as collateral until the loan is paid off.

When you meet all the mortgage payment terms or make a full prepayment, a mortgage deed of release is created. The lender holds the title until then and is the lienholder of record. The title secures the loan, reducing default risk for the lender.

The lending institution's legal counsel usually creates the deed when the loan is satisfied. It reports that the loan is paid in full and states that the lien is removed, with full title transferred to you, the homeowner.

Once you have the title and deed of release, you own the asset free and clear. You're no longer subject to the lender's terms, and the account is closed.

Important Reminder

Make sure to have the deed of release recorded by the same agency that recorded the original mortgage so you can be certain all liens are removed.

Types of Deeds of Release

Employment agreements are another area where a deed of release might apply. It can free both the employer and employee from any obligations under their agreement. Sometimes, it includes a designated payment, like in a severance package.

The deed can outline severance terms, including the payment amount and duration after release. It might also cover confidential information you can't share after termination or restraint clauses preventing you from starting a similar business or soliciting clients.

Tip for Workplace Situations

If you're presented with a deed of release at work, read it carefully to ensure you understand what you're agreeing to.

Examples of Deed of Release

The most common example is when you buy a home with a mortgage—the property is collateral, and the lender holds the lien. Once you pay off the loan, the lender creates a mortgage deed of release.

Another example involves personal guarantees, where you take personal responsibility for a debt, even if it's for your business. You can end this through a deed of release, whether the loan is paid or not.

Note on Liens and Guarantees

Agreeing to a Uniform Commercial Code (UCC) lien for a business loan creates different legal and financial obligations from a personal guarantee. You can find sample deed of release forms online, though you might pay a fee, and ensure they conform to your state's guidelines.

Special Considerations

If your lending bank failed and went into FDIC receivership, and you haven't received your deed of release, contact the Federal Deposit Insurance Corp. (FDIC). They can usually resolve it for you. Use their interactive search tool to check if the government acquired your bank.

Is a Deed of Release Proof of Ownership?

Yes, once you've paid off your mortgage and the lender issues the deed of release, it proves you own your home.

Can I Request a Deed of Release if I Pay off My Mortgage Early?

You shouldn't have to request it—the lender is required to issue the deed once you've paid the mortgage in full.

Is a Deed of Release Called Anything Else?

Yes, it might be called a deed of reconveyance, a full reconveyance form, or a satisfaction of mortgage document—all meaning you've paid off the mortgage and own the property.

The Bottom Line

The deed of release is proof that you've paid off your mortgage and fully own the property. While paying the mortgage, the lender held the title, but upon completion, it's transferred to you, and the deed confirms the lender has no further financial interest.