When a person refinances their loan from one lender to another the mortgage must be discharged with the outgoing lender – the one they are moving away from. This means a ‘mortgage discharge’ form needs to be signed and submitted to the outgoing lender.
In the old days faxes went missing and forms were never received and this allowed the outgoing lender to delay the settlement.
These days it seems forms still go missing even though they are emailed in. But recently we have had one where the client’s signature on the discharge form apparently did not match the signature on the banks records. The client had to go into a branch to show ID and prove it was them to submit the discharge form.
Another, actually the same lender, wanted the spouse to sign the discharge form too, but she was not on title and could not have given a mortgage, but she was a borrower.
In both cases it was the day of the proposed settlement that this happened.
Another non-bank lender – but under a company owned by the same bank above, they have developed their own special discharge form which is not available online. The client must ring them up to get the form sent to them. This allows the lender a last attempt at discouraging them from leaving by making further offers of discounts etc.
These tactics appear to be
a) delaying tactics to allow the outgoing banks to get more interest, and
b) making it hard to leave discourages people from leaving, and
c) it is a form of punishment for leaving
When refinancing where funds are needed for settlement of another property, I suggest you get in early, send the discharge form even before your new loan is approved.
If there are any delaying tactics ring the lender’s complaints section, and threaten reporting them to the AFCA Home – Australian Financial Complaints Authority (AFCA)
I should add one way around this is to use a ‘fast refi’ type process where the new loan settles without the discharge of the old mortgage. A few lenders offer this, and the first thing the old lender knows about it is the repayment of the loan by the new lender, then the discharge of mortgage.
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