What is Mortgage Redemption
When you borrow money from a bank to buy a property, the bank becomes the mortgagee, and you, as the borrower, are the mortgagor. While the bank does not own the property, it holds a security interest over it. This means the bank can enforce the loan against the property if you fail to meet your repayment obligations. In the case of an all-monies mortgage, the bank has the right to claim for other loans / facilities you have with the bank against the property
Mortgage redemption is the process of fully repaying your loan and clearing the bank’s security interest. Once you’ve paid off the debt in full, the bank’s security (and all its associated rights) over the property are released.
The Process for Mortgage Redemption
Step 1: Redemption Notice to the Bank
We will serve a redemption notice to the bank, typically 2 to 3 months before the intended redemption date (depending on the bank’s requirements), to kick-start the process. This is so even when you have made full payment of the loan, though some banks will be able to shorten this period.
Step 2: Bank Will Appoint Law Firm
The bank will confirm our appointment to act on their behalf. They will also provide us with your title deeds and sign the title deed discharge documents.
Step 3: Preliminary Redemption Statement
During this period, the bank will issue a preliminary redemption statement outlining the amount you need to pay, including any interest accrued up to the completion date, when your loan facility is fully settled.
Step 4: Paying off Home Loan (Fully or Partially)
Using CPF Savings:
About two weeks before completion, we will guide you through the steps to transfer CPF funds to the bank via CPF Online.
Using Personal Funds:
You will sign a Letter of Authorisation allowing the bank to deduct the required amount from your account to redeem the loan.
Step 5: Lodging the Discharge of Mortgage
Once the bank confirms receipt of funds, we will lodge the discharge of mortgage documents with the Singapore Land Authority (SLA).
Step 6: Processing by Singapore Land Authority
The SLA will process and issue the finalised title deed.
Step 7: Release of Title Deed
Once ready, we will hand over the finalised title deed and any prior title deeds you have signed with the Bank.
How to Use CPF to Redeem Housing Loan
To make a partial or full repayment of your housing loan using CPF, follow these steps:
- Obtain Approval: Seek approval from your bank mortgagee.
- Check CPF Savings: Ensure you have sufficient CPF Ordinary Account savings and confirm the maximum amount you can use for your property. The information is available on your CPF Home Ownership Dashboard, showing your latest CPF usage and remaining limit.
- Submit Application: Apply online using your Singpass. CPF will process your application within 5 working days.
For full repayment, you will need to provide CPF with a copy of the bank’s redemption statement and conveyancing lawyer’s invoice.
Frequently Asked Questions
Do You Need a Lawyer To Discharge The Mortgage?
For HDB Loans: If you took a loan with HDB, HDB will be able to handle the full discharge of your mortgage, and in most cases a lawyer will not be needed. . More details are available on the HDB website.
For Bank Loans: If your mortgage loan is with a bank, you are required to appoint a lawyer to handle the discharge of the mortgage. This applies regardless of whether your property is an HDB flat, private condominium, or landed property.
What is a Lock-in Period?
The lock-in period with a bank refers to a specific period after taking out a loan (usually a home loan) during which you are not allowed to pay off or refinance the loan without incurring a penalty. It’s essentially a commitment period where you are “locked in” to your current loan terms.
Typically, the lock-in period ranges from 1 to 3 years, but this can vary depending on the terms of the loan agreement. During this period, if you decide to repay the loan in full or switch to a different lender, the bank may charge an early termination fee, which can be a fixed amount or a percentage of the outstanding loan.
Once the lock-in period is over, you’re free to redeem the loan or refinance without any penalties.
Mortgage Redemption Made Easy
At Yuen Law, our conveyancing lawyers are here to guide you through the entire mortgage redemption process. handling the paperwork to liaising with your mortgagee bank, we make the process smooth and hassle-free. Let us help you take the final step toward redeeming your title deed.
