What Is a Partial Release?

Partial release is a mortgage provision allowing some of the pledged collateral to be released from the mortgage contract if certain conditions are met.

In other words, the partial release allows some of your collateral to be taken off the mortgage once a certain amount of the loan has been paid.

Qualifying for partial release may require the borrower to retain proof of payment on the mortgage. The application process could also require submitting a survey map to show which part of the property is to be released and what will remain with the lender’s as the mortgage continues to be paid.

Necessary Steps When Applying for a Partial Release

An appraisal of the current value of the property the lender will retain should be included with those details. A reason for a partial release could be requested with the application. For instance, the borrower might want to obtain a release for part of the land, such as an open space that is not required to support the residence. This could be unimproved land on the property that the borrower does not intend to make use of and another party wishes to acquire for their development or other purposes.

There may be fees, which might not be refundable, in applying for a partial release. Additional fees may be owed to county recorder’s office to make file changes with a mortgage. The approval process for a partial release may take several weeks.

Lenders may have a release schedule that outlines how much of the mortgage must be paid off before a partial release is possible. Not all lenders permit partial releases on properties that are under mortgage.

If the borrower has a deal to sell part of the property, this may be enough to convince the lender to all a partial release. It may still be necessary to offer some incentive to the lender, such as supplemental compensation to secure the partial release. Throughout the transaction, the lender will want to preserve their loan-to-value ratio of the collateral. Part of the requirement for such an agreement could be to pay down the outstanding principal on the mortgage.

When drafting the sale of a portion of a property, the seller must also furnish documentation to allow for the partitioning of the land. That can include conducting a title search to show any and all liens on the property, as well as other records and statements that show the remaining mortgaged property is still occupied.