When you sell a property with a mortgage in NSW, your lender is paid out from the sale funds at settlement and the mortgage is removed from the title through PEXA. You start the process by signing your lender's discharge authority, and it should be done straight after exchange because lenders can take two to three weeks to be ready.
Most sellers still owe money on their home when they sell. That is normal. The mortgage is simply paid out and removed at settlement, so the buyer receives a clear title.
How the discharge works
- You sign a discharge authority. Each lender has its own form, usually online or through your branch
- Your lender confirms the payout figure close to settlement, including interest to the settlement date
- Your conveyancer adds the payout to the settlement figures in PEXA
- At settlement, the lender is paid from the sale proceeds and the discharge is lodged with NSW Land Registry Services
- The balance is paid to you
How long does it take?
Many lenders ask for at least 10 business days' notice, and some need longer. With a standard 42 day settlement, sign the discharge authority within days of exchange. If you leave it until the final week, your settlement may be delayed and you may pay the buyer interest.
Things that can slow it down
| Issue | What to do |
|---|---|
| Fixed rate loan | Ask your lender about break costs early, so the payout figure is not a surprise |
| Offset or redraw accounts | Confirm how the lender treats funds in them at payout |
| More than one loan on the property | Each loan needs its own discharge |
| Changing lender for your next purchase | Your new lender's settlement may depend on this one |
| Lender not registered on PEXA | Rare, but your conveyancer may need to make other arrangements |
Buying and selling at the same time?
If your next purchase depends on the funds from this sale, both settlements are often linked in PEXA on the same day. A late discharge on your sale then delays your purchase too. See selling and buying at the same time.
Common questions
FAQs
When should I request my mortgage discharge?
As soon as contracts are exchanged. Do not wait until the week of settlement.
Does my lender charge a fee to discharge?
Most do. Your lender will tell you the amount, and it is included in the payout figure.
Can I sell if I owe more than the sale price?
You can, but you will need to pay the shortfall at settlement or agree terms with your lender before you exchange.
Sources: NSW Land Registry Services · PEXA
City Peak Conveyancing acts on NSW property only. This page is general information, not advice about your circumstances.