A deed of reconveyance is a legal document indicating the transfer of property rights from a lender back to a borrower after full loan repayment. The lender directs a trustee to issue a deed of reconveyance to release the borrower from a debt obligation once it’s settled. For reconveyance of deeds, download and complete this customizable deed of reconveyance form to facilitate the legal transfer of property rights.
When a party obtains a mortgage (home loan) to buy a property, the borrower signs a document indicating that he or she conveyed the property as a security interest to the lender as long as the mortgage is outstanding.
If the borrower defaults on the loan, the lender can foreclose on the property and transfer the title of the property. However, if the borrower clears the loan, he or she will receive a deed of reconveyance that secures the borrower’s interest in the property, especially if borrowers also pay property taxes on time. Reconveyance means transferring the title of a property to the borrower once a mortgage has been fully settled.
Therefore, a deed of reconveyance is a document issued by a lender to a borrower after he or she has completed the repayment of a mortgage loan. A reconveyance of deed signals that the borrower has fulfilled the debt obligation and transfers property rights from lender to borrower.
There are three main parties in a deed of reconveyance:
These are the parties in the standard deed of reconveyance. However, the parties may vary depending on the loan agreement terms and according to state law.
There are several key terms found in a reconveyance form, including:
A deed of reconveyance is important because it shows that the borrower has fulfilled his or her debt obligations with the lender. The implications of this include the following:
Proof of ownership with a free and clear title — The deed of reconveyance releases any claim the lender had on the property and indicates the asset’s rightful owner. It also shows that the title is clear and free from any claims and that the homeowner can sell the home or use it as security for another loan. A deed of reconveyance form transfers the property title from lender to borrower.
Legal requirement — State law requires lenders to file a deed of reconveyance within 72 days of the debt settlement to the county recorder and the borrower within a certain period (usually 30–60 days) after the final loan payment.
The following details should be included in a valid deed of reconveyance sample:
After a borrower has fully repaid his or her loan, the lender will prepare a deed of reconveyance form as legal proof that the debt has been paid. The trustee then transfers the property title to the borrower and issues the deed of reconveyance as evidence that the borrower paid off the mortgage. Reconveyance of deeds completes the purchase process for the homeowner.
The main difference between the reconveyance of deeds and satisfaction of mortgage documents is the type of mortgage instrument used, which often depends on state law. Depending on the state where the property is located, the lender might opt for a satisfaction of the mortgage rather than a deed of reconveyance. In states where a deed of trust is used, a neutral third party (the trustee) holds the property’s title in trust for the lender (the beneficiary). Once the borrower pays the loan in full, the trustee signs a deed of reconveyance to transfer the title to the borrower. The deed transfers the property from the trustee to the borrower.
A satisfaction of mortgage is used in states where a standard mortgage agreement is used. The satisfaction of mortgage is prepared and signed by the lender once the borrower fulfills his or her debt obligations. The document transfers the property from the lender to the borrower.
A deed of release indicates that a property owner has fulfilled all the mortgage settlement terms, while a deed of reconveyance transfers full ownership of the title rights to the owner.
In real estate, different deeds serve varying purposes according to the use context. The word “deed” refers to a legal document that transfers ownership of property from one party to another. These three main types of deeds differ as follows:
A deed of trust is an instrument used to secure a loan against a borrower’s real property. Through the trust deed, the borrower (trustor) transfers the legal title of a property to a neutral third party called a trustee, who holds it on behalf of the mortgage lender. Once the loan is paid in full, the borrower may receive what is called a full reconveyance, which transfers the title of the property back to the borrower.
A grant deed is a legal document that transfers a title from a grantor (seller) to a grantee (buyer). The instruments guarantee that the grantor has not previously sold the property to another person or entity and that the title is clean without any undisclosed encumbrances.
A property deed is a general term that includes trust deeds, grant deeds, and other real estate deeds used to establish the ownership of property that is the subject of transfer from one party to another.
Once the borrower fully settles his or her debt obligation, the lender sends instructions to the trustee indicating that the debt obligations related to the property have been fulfilled. The trustee then drafts the deed of reconveyance to transfer property rights to the borrower. The process of writing the document differs for each party as follows:
When a mortgage whose terms were outlined in a deed of trust is paid in full, a deed of reconveyance is prepared to discharge the trustor from his or her debt obligation on the property.
The deed of reconveyance is used to discharge the trustor from the debt obligation after completion of the final debt payment. Other common use cases include the following:
It is generally not legally viable to use a deed of reconveyance in the following circumstances:
After you’ve completed your mortgage payments, ask your lender for a reconveyance of deed. Your lender will then engage the trustee to prepare the document. Since the deed of reconveyance is a public record that you have settled your loan obligation, you can use it to secure another mortgage or present it as evidence of unencumbered ownership of your property. Even though the process is clear, it may be helpful to work with an experienced real estate lawyer in your area.
After a borrower settles his or her property debt obligation, a reconveyance of deed is necessary. The document is prepared and signed by the trustee, a neutral third party who holds the title on behalf of the lender and prepares the deed at the lender’s request. Notably, the deed of reconveyance must be signed, notarized, and recorded with the county recorder’s office so that public records will reflect that the property is free from the lien.
The trustee named on the deed of trust will generally issue a copy of the deed of reconveyance to the borrower and record it with the county recorder’s office. However, if the trustee fails to record the document but issues a signed and notarized copy to the borrower, the borrower may record it using the following steps:
A substitution of trustee and full reconveyance are two documents combined as one. The first document is the substitution of trustee, used within the context of the trust deed to replace the trustee who holds the property deed for the benefit of the lender within the mortgage term. The full reconveyance part of the document indicates that the borrower has paid the mortgage in full. The substitution of trustee and full reconveyance is used when the original trustee is unable, unwilling, or unavailable to execute a reconveyance deed and release the lien on the property.