What Is A Defeasance Clause?

What is a Defeasance Clause?

It refers to the contract term which is part of a mortgage, where the lender agrees to give the borrower title to the buyer once all the mortgage payments are made. Once all the mortgage payments are completed, the defeasance clause acts as a legal mechanism representing the property title to that specific borrower. Once all the debt is cleared from the borrower’s end, the defeasance clause allows the borrower to attain a clear title.

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How Does A Defeasance Clause Work?

In real estate, there is great importance given to the Defeasance Clause. It is something that relates to property ownership given to the buyer once the mortgage is fully paid off. The purpose of the defeasance clause is to safeguard the homeowners’ rights. After paying the full balance of the mortgage, a buyer will attain the title to the property. This is how the defeasance clause works for the home borrowers.


What Is The Defeasance Process?

The defeasance process refers to the process in which borrowers can exchange securities that are backed by the U.S. You can say it is a process that makes borrowers get free from the financial obligations of debt. The defeasance process releases the mortgaged property’s title to the borrower. That allows the borrower to refinance or sell the property before the loan has been fully paid off.


Defeasance Clause Real Estate Definition

The defeasance clause in real estate refers to the term of a mortgage contract that determines the title of the specific property will be transferred to the borrower once all the payment conditions are met by the lender. Those borrowing money to purchase  real estate need to have a defeasance clause in their loan documents. In addition to borrowers, it is also important for real estate brokers to understand the defeasance process.


 Defeasance Clause Example

A defeasance clause states that the lender will give the borrower the property ownership once all the mortgage payments are made. It functions as a legal agreement, transferring the property title to the borrower. Let’s discuss some examples:

Debt Defeasance: Debt defeasance allows the borrower in debt to get rid of certain liabilities from the balance sheet. Therefore, debt defeasance takes place when a debtor is released from the obligations.


Defeasance Clause In a Deed of Trust

A defeasance clause in a deed of trust means simply providing security for the debt. It gives the borrower the right to give security to the deed or property title on the completion of debt in full. There are various types of mortgages or trust deeds that borrowers can use.


To get more information on a Defeasance Clause or to get Prequalified click Cain Mortgage Team or contact us today at 803 261 9267!