In the Philippines, a Real Estate Mortgage (REM) is a contract whereby a debtor (mortgagor) secures to the creditor (mortgagee) the fulfillment of a principal obligation, specially subjecting immovable property or real rights to the security of the debt.
Once the underlying loan or obligation has been fully paid, the mortgage does not automatically vanish from the title. To clear the property’s transfer certificate of title (TCT) of this encumbrance, a formal process known as the Cancellation of Real Estate Mortgage must be undertaken.
1. The Legal Basis for Cancellation
Under Philippine law, a mortgage is an accessory contract. Its existence depends on the principal obligation (the loan). Pursuant to Article 2130 of the Civil Code and the Property Registration Decree (P.D. 1529), once the principal obligation is extinguished, the mortgagor has the right to demand the release of the mortgage and the return of the title free from such lien.
2. Essential Documents Required
To initiate the cancellation process with the Registry of Deeds (RD) where the property is located, the following documents are generally required:
Primary Documents
- Release of Real Estate Mortgage: A notarized document executed by the mortgagee (the bank, financial institution, or individual lender) stating that the loan has been paid in full and that they are releasing the mortgage.
- Owner’s Duplicate Copy of the Title: The original TCT or CCT (Condominium Certificate of Title) held by the bank or lender must be surrendered.
- Promissory Note (Original): Often returned by the bank upon full payment, though not always required by the RD, it serves as proof of the fulfilled obligation.
Administrative Requirements
- Valid Government IDs: Of the mortgagor and, if possible, the authorized signatory of the mortgagee.
- Secretary’s Certificate: If the mortgagee is a corporation (like a bank), this document proves that the person who signed the "Release of Mortgage" was authorized by the Board of Directors to do so.
- Latest Tax Declaration: A certified true copy from the Assessor’s Office.
- Real Property Tax Clearance: Proof that the current year’s property taxes have been paid.
3. The Step-by-Step Process
Step 1: Secure the Release of Mortgage
Upon final payment, the lender prepares the Release of Real Estate Mortgage. It is crucial to ensure this document is notarized. If the lender is a bank, they will typically send the document and the Owner's Duplicate Title to their branch for your pickup.
Step 2: Payment of Registration Fees
Bring the documents to the Registry of Deeds having jurisdiction over the property. You will need to pay the registration fees, which are calculated based on the value of the mortgage being cancelled.
Step 3: Entry in the Primary Entry Book
The RD will enter the transaction in their Primary Entry Book. An examiner will review the documents to ensure they are in order and that the signatures match those on file.
Step 4: Annotation and Issuance
The Register of Deeds will annotate the "Cancellation" on the original title kept in their vault and on your Owner’s Duplicate Copy. Once signed by the Registrar, the encumbrance is officially "cancelled" or "nullified" on the face of the title.
4. Key Considerations and Common Pitfalls
Lost Owner’s Duplicate Title
If the bank or the owner loses the original TCT, a simple cancellation is not possible. You must first undergo a court process for Reconstitution of Title or Issuance of a New Owner’s Duplicate Copy under P.D. 1529, which can take several months to years.
Deceased Mortgagee
If the lender was an individual who has since passed away, the heirs of the lender must execute the release, often requiring an Extrajudicial Settlement of Estate to prove their legal authority to sign the release.
Annotation vs. Clean Title
A common misconception is that the RD will issue a "brand new" title without the mortgage mentioned. In reality, the RD simply stamps or types a Memorandum of Cancellation on the existing title. If you want a "clean" title without any history of the mortgage showing, you must apply for a Replacement Title, which involves additional fees.
5. Summary of Costs
| Fee Type | Description |
|---|---|
| Notarial Fees | Cost for notarizing the Release of Mortgage. |
| Registration Fees | Paid to the RD (calculated via the sliding scale in the RD fee table). |
| Legal Research Fee | Usually a nominal fee (approx. ₱10-₱30) per transaction. |
| Doc Stamp Tax | Generally not applicable to the cancellation itself, as it was paid during the mortgage creation, but check for local variations. |