What does a defeasance clause in a mortgage state?

A defeasance clause in a mortgage states that the mortgage becomes void once the loan is paid off. This clause is an important provision in mortgage agreements as it outlines the conditions under which the borrower can fully discharge their obligation to the lender. Once the borrower fulfills their payment responsibilities, the lender must acknowledge that the mortgage is no longer in effect, effectively releasing the lien on the property.

This clause provides clarity and protection for the borrower, ensuring that they receive clear title to their property after satisfying the terms of the loan. In many legal and financial contexts, the existence of a defeasance clause serves to reinforce the agreement that the mortgage serves only as security for the loan, and once the loan is repaid, the lender's claim to the property is extinguished.