I have paid the last monthly mortgage instalment. And now, what do I do?
When you pay the last instalment of the mortgage it is a happy moment, but it does not end here; it is necessary to cancel the mortgage so that the property is free of encumbrances.
What is mortgage cancellation?
The mortgage cancellation is the procedure that must be carried out so that the mortgage loan is cancelled in the Land Registry when the mortgage is paid off. Although it is not a compulsory procedure, if you do not do it, the mortgage will continue to be registered in the Land Registry. It is also necessary to cancel the mortgage if you want to sell the property or take out another loan.
If you do not cancel the mortgage, the property will continue to be mortgaged for 20 years, even if all the instalments have been paid. Only after this period of time, the Land Registry will remove the charges automatically, without any cost, when updating the information.
Where and how is the cancellation done?
You can do the cancellation yourself, either through the financial institution where you have signed the mortgage or through a law firm.
The first step is to ask the bank where you have the mortgage for a certificate of zero debt balance that justifies that the mortgage has been paid off. This document is free of charge for the client, as established by the Bank of Spain.
Once you have the document from the bank that justifies the end of the debt, you must go to the notary to have the cancellation deed drawn up, which must be signed by a proxy of the financial entity.
In the past it was necessary to pay the Tax of Documented Legal Acts although it was at zero cost because it is a transaction that is exempt from the tax. In some Autonomous Communities, such as the Canary Islands, it is no longer necessary to settle the tax in order to present the deed at the Land Registry.
Registering the deed in the Land Registry
The last step is done at the Land Registry where you must go with the deed to make the cancellation of the mortgage.
What happens if I do not do the cancellation?
The problem that you may have if you do not cancel the mortgage when you finish paying the last instalment is when you sell the property, because it will appear in the Register as mortgaged. If the buyer asks for a mortgage, the bank will not grant it as the property is already mortgaged, and potential buyers may not visit it because it is not free of encumbrances.
Another problem is that if too much time passes, the process of cancelling the mortgage can be delayed because of the difficulty of finding all the documentation if there have been changes in the financial entity.
In order to avoid problems after the mortgage has been paid off, our firm recommends that the cancellation procedures be carried out as soon as possible so that the property is free of encumbrances.