Mortgage Cancellation

The Mortgage Cancellation is a document issued upon termination of a contract and which proves its termination.

In the case of a contract related to home loans, it proves the extinction of the debt and the termination of the associated mortgage.

Mortgage Cancellation: how is it processed?

When the debtor, usually the owner, settles the entire debt to the bank (principal and interest), the financial entity issues a document called "Mortgage Extinction". In this way, the bank declares the cancellation of the mortgage and confirms that the debt is settled, the latter losing any rights over the property in question.

There is no place to register the Distrate if the Mortgage was initially registered with the Conservatory, otherwise it is considered null.

Mortgage Cancellation: what is it for?

This document is normally required in public deeds when a property is transferred, as it attests to the extinction of the mortgage on the property and must be registered with the property registry at the respective Land Registry Office.

Mortgage Cancellation: What are the costs?

It depends on the bank. Some banks exempt customers from all distract expenses (commissions for mortgage and stamp duty cancellation) if the debtor complies with the term agreed in the mortgage loan contract, others do not.

If there is an early amortization of the amount due, a commission may be paid, which can vary between 100 and 200 €.

The payment of a commission to the Financial Entity, due to early repayment, is duly regulated in article 6 of Decree Law nº 51/2007 :

  • The amount of the commission to be paid by the client in the case of early, partial or full reimbursement or credit transfer to another institution is clearly and expressly stated in the contract and cannot exceed:

    • 0.5% to be applied on the capital that is repaid in the case of contracts entered into under the variable rate regime;
    • 2% to be applied on the capital that is repaid in the case of contracts concluded under the fixed rate regime.
  • The provisions of the previous number do not apply to contracts in execution in which the exemption from commission payment has been agreed between the parties.
  • In the event of reimbursement for reasons of death, unemployment or displacement, commissions cannot be applied.
  • Without prejudice to the provisions of paragraph 1, the parties may agree to an exemption from payment of the early repayment fee.
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