What Is a Deed of Reconveyance?

When you buy a home with a mortgage, the mortgage lender typically holds the property title until the mortgage is paid off. A deed of reconveyance transfers the title of a property from a mortgage lender to the borrower once the loan has been fully repaid. 

It’s a time to celebrate, but without ensuring that the deed of reconveyance is filed appropriately with the county recorder’s office, you could face difficulties selling the home later. Read on to learn everything you need to know about a deed of reconveyance to protect your property. 

A deed of reconveyance is a legal document that transfers the title of a property from a lender, usually a mortgage holder, back to the borrower once the mortgage loan has been paid in full. It confirms that the title was transferred from the lender to the borrower, and the borrower is now the legal title holder. The deed of reconveyance must be recorded in the local county or recorder’s office to finalize and track the transaction and clearance of the mortgage lien. This is usually done by a title company at the request of the lender. 

You’ll use a deed of reconveyance is used in three common instances:

• At closing, if you sell the property before the mortgage is fully repaid
• When refinancing a mortgage
• When the mortgage is fully repaid

To understand how a deed of reconveyance works, it’s important first to understand earlier deeds. You will receive a deed trust when you purchase a home with a mortgage. A deed of trust is an agreement in which the borrower states they will repay the mortgage. With a deed of trust, the lender will hold the legal title to the property until the loan is fully repaid. 

While the property has a lien against it, such as a mortgage lien, it cannot be sold. If the sale proceeds will satisfy the existing mortgage, a deed of reconveyance is included in the sale’s closing. That means if you sell the property while you still have an outstanding balance on your mortgage, a deed of reconveyance will be used at closing to clear the lien. 

A title insurance company usually handles filing the deed of reconveyance. Once a deed of reconveyance is issued, a title search will show that the lien has been paid in full and the borrower is no longer at risk of foreclosure. The lender will contact the title company and then issue the deed of reconveyance, usually within three to four weeks of the final mortgage payment.

If you refinance your home with a new mortgage, you will also receive a deed of reconveyance showing that the previous mortgage was repaid and the lien was removed. In that case, the new mortgage lender will place a lien on the property and hold the legal title until the mortgage is paid off. In addition to those scenarios, you’ll receive a deed of reconveyance when you pay off the mortgage in full. 

A deed of reconveyance usually refers to the primary mortgage on a property. Second mortgages or home equity loans may also use the property as collateral. The lender can assert their right to foreclose if a borrower defaults on these second loans. You could receive a deed of reconveyance for your first mortgage, while the second loan means the lender still has a lien on the property.

The rules and structure of a deed of reconveyance can differ from state to state and lender to lender. For example, some states use trust deeds instead of mortgages. In that case, a third party, called a trustee, holds the mortgage on behalf of the lender. Some states also use a satisfaction of mortgage document rather than a deed of reconveyance, although they serve the same purposes. 

The information included in a deed of reconveyance typically includes:

• The mortgage borrower’s name and address
• The lender or trustee’s name
• A description of the property with the parcel number from the original deed
• Documentation that the borrower has repaid the loan in full, fulfilling their obligation to the lender
• Confirmation that the property secured by the mortgage or trust deed now belongs to the borrower
• A signature line that all parties must sign in front of a notary 
• The document must be notarized, with the notary indicating they witnessed the signing. 

A deed of reconveyance and a satisfaction of mortgage serve similar purposes. They are different legal documents used in different states for the same purpose. If the state where the property is located is a mortgage state, you may receive a satisfaction of mortgage loan document instead of a deed of reconveyance. 

A deed of reconveyance used with a deed of trust states that the debt outlined has been fully paid, while satisfaction of mortgage confirms that a mortgage loan specified in a mortgage agreement has been fully paid. Either document will lift the mortgage lien from your home. You will also receive notification that your escrow account will be closed, with any remaining balance returned to you. 

The lender or designated agent may charge recording and service fees for a deed of reconveyance. The specific fees can vary depending on the location and the lender. You can ask your lender about associated fees to plan accordingly. 

Recording a deed of reconveyance is important because it provides public notice that the lender’s interest in the property has been released. If it is not recorded, there may be confusion or disputes regarding the rightful owner of the property. You may encounter difficulties if you try to sell the property later.

Paying off the money owed is what terminates the mortgage. Once the loan is paid off, you can ask your lender about handling the deed of reconveyance process to ensure all details are properly filed according to state guidelines. 

When you sell your home, refinance or pay off your mortgage, you’ll get a deed of reconveyance or satisfaction of the mortgage document to clear the lien. If not properly filed, you could face difficulties selling the property. To prevent this, speak with your lender to ensure the process is initiated with the title company, and stay in contact until you receive confirmation of filing.