What’s next after I’ve paid off my mortgage?

Myth #6 – I’ve just paid off my mortgage – finally, I own my home!  

You’ve spent the last 15, 20, or maybe even 30 years working hard and budgeting diligently in order to make those monthly mortgage payments. Your long term goal has at last been reached.  The champagne is on ice and the cork is about to be popped – you finally own your own home!  Well, actually, not quite.  There is one more step which needs to be taken and must not be overlooked.   

What do I need to do?

Currently in Bermuda, when you enter into a legal mortgage, you transfer your interest in your property to your lender, which provides security for the loan. Once the loan has been repaid, your interest in the property must be transferred back to you, either by a deed of reconveyance (if a freehold property) or a deed of reassignment (if a leasehold property).

What happens if a reconveyance or reassignment is overlooked?

If the reconveyance or reassignment is overlooked, the legal title, or leasehold interest, will remain with your lender.  This will cause problems if you wish to sell or mortgage your property in the future.   

There is no time limit as to when a reconveyance or reassignment can be executed. The oversight can be fixed, but the longer you leave it, the greater the risk to you. What if your lender is a small, private company?  Or a private individual?  The company could be wound up.  Your private lender could die.  Who will execute your deed transferring ownership of the property back to you?  You could face considerable stress and delay whilst searching for the answers to those questions.  

Best practice is to ensure that a reconveyance or reassignment is executed as soon as your mortgage has been redeemed.

How much will a reconveyance or reassignment cost, and who pays for it?

It is a term of most lending agreements that the borrower bears the associated costs of the legal fee for preparing the deed and the stamp duty payable on the deed.

The legal fee is usually a set fee and your legal advisor can provide a quote for this prior to commencing the matter.

Stamp duty is due in accordance with Head 31 of the Stamp Duties Act 1976 and is calculated at one twentieth of one percent of the total amount borrowed.  For example, if your total borrowing was $500,000.00, you will pay $250.00 stamp duty.

What should I do to ensure that my reconveyance is not overlooked?

If your lender is a large banking institution, typically they will notify you, or your legal advisor, once the final mortgage payment has been made. However, this can sometimes be overlooked — especially if your lender is a private company or individual who may not be quite so knowledgeable regarding the intricacies of land law.  

We recommend taking matters into your own hands by taking the following steps:

1. Upon making the final mortgage payment, contact your legal advisor, inform him/her that you require a reconveyance or reassignment to be prepared and ask for a fee quote;

2. If you are happy with the fee quote, contact your lender and give your authorisation for your title deeds to be forwarded to your legal advisor. Once your legal advisor is formally instructed, she will take care of the matter on your behalf.

While the system will undoubtedly change once land title registration comes into effect in Bermuda, until that time, the above will continue to apply for all existing legal mortgages and all new legal mortgages entered into prior to the introduction of Bermuda’s Land Title Registration system.

So, keep on top of your investment.  You’ve worked hard for your property.  Budget for this essential but relatively small cost and ensure that when you have finally paid off your mortgage, you are the legal owner of your property.   

Stephanie Matthews is a paralegal who works with the Property and Estate Planning group at Marshall Diel & Myers Limited. She may be contacted at [email protected] or 295-7105.  

A copy of this article can be found at the firm’s website at www.law.bm. 

This column is for general guidance only. It should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.