What does a defeasance clause in a mortgage provide for?

A defeasance clause in a mortgage serves an important purpose by stipulating that the mortgage lien is to be released when the borrower has fulfilled their obligation to pay off the note in full. This means that once the borrower makes all required payments and the debt is satisfied, the lender must remove the lien from the property, thereby clearing the borrower’s title. This clause effectively protects the homeowner’s right to their property free of mortgage claims once they have met their financial obligations.

The inclusion of a defeasance clause is a common practice that offers additional security to borrowers, ensuring that they will regain full ownership of their property without the encumbrance of the mortgage once they fulfill their payment duties. It promotes confidence in the borrowing process, as the borrower knows that the lien will no longer exist upon full repayment.

In contrast, other options like canceling the lien upon sale, altering mortgage terms, or providing rights to refinance do not accurately describe the specific function of a defeasance clause. Each of those scenarios involves different legal and financial processes distinct from the purpose of the defeasance clause.