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Discharging a Mortgage: Pros and Cons of Removal from the Land Register and What Costs to Expect
Discharging a Mortgage: Pros and Cons of Removal from the Land Register and What Costs to Expect
Since most buyers finance the purchase of a property with a loan, a land charge is entered for this purpose in section three of the land register. Once the mortgage is fully paid off, many owners wonder whether they should have the land charge deleted or whether they would rather leave it in the land register. This article helps you answer the questions surrounding the application for deletion of the land charge.
What is a land charge and why is a land charge entered in the land register?
Imagine you are buying a house and taking out a loan from the bank for it. To ensure that you repay the loan, a kind of „security mark“, the so-called land charge, is entered into Land Register entered against your property. This registration of a new land charge is like a promise to the bank: if for any reason you are unable to repay the loan, the bank is allowed to sell your house to get the money back. This sale can take place through a judicial foreclosure or compulsory administration.
This land charge is like a safety net for the bank. If you cannot pay your loan installments, perhaps due to financial difficulties, the bank has something in hand to get its money back. This land charge remains in the land register until you have fully repaid your loan. Thus, the land charge serves as security before complete repayment takes place.
After the loan has been fully repaid, the land charge does not automatically disappear from the land register. You have to take action here yourself. You must submit an application to have the land charge removed from the land register. It is like removing an expired security seal that shows your obligation to the bank has been fulfilled.
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When does it make sense to leave the land charge in the land register?
It is a liberating feeling when the repayment of the loan is complete and you have received the release from the bank. Once the land register no longer contains any entries in favor of the bank, the bank no longer has access to the property and could therefore not initiate a forced auction if necessary. However, there are several reasons why the registered land charge should remain in the land register even though the loan has already been fully paid off.
- The deletion of the existing land charge incurs costs. If the land charge remains in the land register, no costs will be incurred either.
- The land charge can be used for new financing if a conversion or modernization is planned.
- Using the land charge to purchase another property. If the land charge remains in the land registry, no fees will be incurred by the notary and the land registry office.
It is important to know that transferring the land charge to another institution in most cases causes higher costs than creating a new one. If you negotiate good financing conditions with the bank registered in the land registry, it is advantageous to use the land charge that is already entered. In any case, it is recommended to calculate all options and then make a wise decision.
What reasons speak for the deletion of a land charge?
To make an informed decision, one should read the deed of appointment of the land charge carefully. Although the reading is not easy, it is nevertheless appropriate.
Axel Drücker from the Mecklenburg-Western Pomerania Consumer Advice Center draws attention to a danger inherent in the land charge, namely: „It says in there that I submit to the enforcement of judgment subject my entire assets to.“ This passage could become highly problematic if there are multiple property owners, but only one of them incurs debts. In practice, it means that everyone could be liable for the individual's debts and ultimately lose the house or apartment. In such a constellation, it is naturally advisable to have the land charge deleted from the land register as soon as possible.
Even when selling a property, the cancellation of the land charge is usually a prerequisite for the transfer of ownership to be completed. Most buyers choose a bank with the best possible conditions for financing the property. In most cases, however, this is a different institution than the one already entered in the land register. The cancellation of the existing land charge is notarized in the purchase agreement, and the notary is authorized to handle this. The buyer's bank will apply for the cancellation of the land charge at the land registry office and ensure that the property is free of encumbrances before the financing is finalized. As soon as the cancellation is completed, the new land charge of the financing bank is entered.
The cancellation of the land charge is therefore not only a formal matter, but also an important prerequisite for the smooth running of the Real estate sale and the Financing. It gives the buyer the assurance that the property is free of prior encumbrances and the seller the certainty that they have fulfilled their obligations to the bank.
Even if the loan has not yet been fully paid off, the land charge can be canceled upon sale. However, the bank must have the security that the remaining loan amount is paid to the bank; otherwise, the bank will not issue a consent to cancellation. In practice, this means that the purchase price, taking into account the amount of the land charge, must be higher than the debts the seller still owes the bank. The buyer is then instructed by the notary to divide the due purchase price between the seller and the bank accordingly in order to delete the land charge from the land register.
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How do I proceed in practice if I want to have the land charge (Grundschuld) deleted from the land register?
Assuming you have fully paid off your property loan. You do not intend to sell the property in the near future. You also do not want to use the land charge for another loan with the same bank for remodeling, renovation, or similar purposes. It is important to you to have the land charge removed from the land register and to have a clean land register without encumbrances. If this is the case, proceed as follows: 1. As the property owner, you urgently need the Consent to cancellation by the creditor, speak to the bank. The latter will only issue this to the creditor once the loan has been fully repaid. 2. You must take the deletion consent to the notary. 3. The To note will arrange for the cancellation of the land charge at the land registry.
You have found your dream property and are now looking for the right financing? Then we recommend our expert Kathrin Kaufmann from Best-Finanzierung. You can find further information on our page about Real Estate Financing.
How much does it cost to have the land charge cancelled?
Costs for the cancellation of the land charge are borne by both Land Registry Office as well as from To note billed. The Bank is not allowed to charge fees for issuing the deletion consent claim. The amount of the costs depends on the amount of the registered land charge.
Notaries charge approximately 0.2 percent and the land registry office also charges approximately 0.2 percent. So if a land charge in the amount of 300,000 EUR is entered, the fees in this case total 1,200. Thus, 600 EUR goes to the land registry office and 600 EUR to the notary.
FAQ regarding: Cancellation of land charge and deletion consent
How do I get permission to cancel a land charge?
Answer: Quite simple: As soon as you have fully repaid your mortgage loan, your bank will normally send you this important document, the so-called declaration of consent to deletion, automatically. Remember, it is a special piece of paper, almost like a diploma, confirming that you have paid off your debt. It is official and notarized, so keep it in a safe place – it is the key to having the land charge removed from the land register.
Can I delete the land charge without having the deletion consent?
Answer: No, that doesn't work. Imagine it like a locked cell phone: without the correct code, you cannot unlock it. In the exact same way, you need notarized permission to remove a land charge or mortgage from the land register.
However, there is an alternative to deleting the land charge: the assignment of land charge. It is quite similar to handing your phone over to someone else, but the unlock code remains the same. For example, if you transfer your loan to another bank, the land charge that has already been registered can be transferred to the new bank. This is convenient because you don't have to start everything over from scratch. The banks take care of the necessary steps, and a note regarding the transfer is simply added to the land register.
Do I need a notary to cancel a land charge?
Answer: Yes, that is absolutely necessary. Imagine it like canceling an important contract: you cannot simply do it alone. You need an official confirmation that you are allowed to delete the land charge. The notary then submits this confirmation and the application to delete the land charge to the land registry office for you. Without this step, it is not possible to remove the land charge from the land register.
What documents do I need to have the land charge deleted?
Answer: Imagine you want to remove an important stamp from your passport. For this, you need two things: first, permission (that is the deletion consent) and second, an official application in which you request the removal of the stamp. Once you have these two documents, you take them to a notary. The notary is like an official stamping service that confirms everything is correct. They ensure that your documents are officially notarized and then sent to the land registry office. Without this step, the land charge cannot be removed from the land register.
How long does it take to get the permission to delete a land charge (release of mortgage)?
Answer: Usually, deleting the land charge is quite fast—often just a few days or sometimes a few weeks. It depends on how quickly your bank works. If you then also want to have the land charge actually removed from the land register, it usually takes a few weeks longer. It is similar to waiting for a delivery: sometimes it is faster, sometimes it takes a bit longer, depending on how quickly the sender is.
Is there a template for the permission to cancel a land charge?
Answer: Yes, there is. Usually, the bank from which you received the loan provides a form of this kind. You just need to fill out this form and send it back to the bank. The bank will then send you the completed document so that the final removal of the land charge can be carried out. Think of this document like an important receipt that confirms you have paid off your loan and that the repayment is complete. Keep it in a safe place, preferably with your other important documents.
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