Owning property is a major milestone, but when it is mortgaged, the title remains burdened until the loan is fully settled. Understanding the cancellation of mortgage is important to ensure that your property title is legally cleared and free from encumbrances.
This guide explains what a mortgage is, how to cancel mortgage in the Philippines, mortgage cancellation steps, requirements for canceling mortgage, qualifications for mortgage cancellation, and answers frequently asked questions.
What Is a Mortgage?
A mortgage, commonly referred to as “sangla” in the Philippines, is a legal agreement where a debtor (the mortgagor) secures a loan from a creditor (the mortgagee) by offering property as collateral. While ownership remains with the mortgagor, the property is burdened until the debt is fully paid.
Under Article 2085 of the New Civil Code of the Philippines, a mortgage is a right in rem, meaning it attaches to the property itself regardless of changes in ownership.
Article 2085, NCC
“The following requisites are essential to the contracts of pledge and mortgage:
(1) It must secure a principal obligation;
(2) The mortgagor must be the absolute owner of the property;
(3) The mortgagor must have free disposal of the property or legal authority to mortgage it.”
In simple terms, a mortgage serves as a security loan ensuring fulfillment of a debt.
When Do You Cancel a Mortgage?
Pursuant to Article 2087 of the New Civil Code, the existence of a mortgage depends on the principal obligation.
Article 2087, NCC
“When the principal obligation becomes due, the property mortgaged may be alienated for payment to the creditor.”
Extracting its essence, once the obligation is extinguished, the mortgage loses its purpose and must be cancelled. This usually happens through:
- Full payment of the loan
- Replacement or refinancing of collateral
- Expiration of the agreement
- Court declaration extinguishing the obligation
What Is a Cancellation of Mortgage?
A cancellation of mortgage is the legal process of removing the mortgage annotation from your Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) after the loan obligation has been fully paid or extinguished.
Without proper cancellation:
- Your property remains legally encumbered
- You cannot sell, transfer, or refinance smoothly
- Banks and buyers may reject your title
Payment alone is not enough, registration is required.
Security Agreement Under Philippine Law
Under Republic Act No. 11057 or the Personal Property Security Act, security agreements must be in writing to protect the interests of all parties.
Sections 5–6, RA 11057
“A security interest must be created through a written agreement signed by the parties, clearly establishing their intent to create a security interest.”
While RA 11057 primarily applies to personal property, it reinforces the importance of proper documentation for both mortgage and chattel mortgage releases.
Qualifications for Mortgage Cancellation
You may qualify for mortgage cancellation if:
- The loan has been fully paid
- The mortgagee executes a release or cancellation
- A court order declares the obligation extinguished
- The mortgage is replaced by another security
- All legal and documentary requirements are complied with
Requirements for Canceling Mortgage in the Philippines
Full Cancellation / Release of Mortgage
- Notarized Cancellation or Release of Mortgage
- Owner’s Duplicate Copy of TCT or CCT
Partial Cancellation / Release of Mortgage
- Release of Mortgage Contract
- Owner’s Duplicate Title
- Certified True Copy of Tax Declaration
Cancellation of Mortgage by Court Order
- Court Order
- Certificate of Finality
- Owner’s Duplicate Title
All documents must be filed with the Registry of Deeds (LRA).
Where to File for the Cancellation of Mortgage Property?
File all requirements at the Registry of Deeds under the Land Registration Authority (LRA) where the property or chattel mortgage is registered.
Sounds Overwhelming? It doesn’t have to be!
Paying off your mortgage is a major achievement, but your ownership is not fully protected until the cancellation of mortgage is properly registered. Without this final step, your property title remains legally encumbered, which can cause delays, rejections, or disputes when selling, transferring, or refinancing your property.
With multiple requirements, strict Registry of Deeds standards, and possible bank or court-related issues, processing a mortgage cancellation can be time-consuming and overwhelming. This is where FileDocsPhil comes in. Our team ensures that your mortgage cancellation steps are handled accurately, efficiently, and in full compliance with Philippine laws and regulations.
Let FileDocsPhil Do the Work!
Don’t let a paid-off loan continue to burden your property title. File your cancellation of mortgage correctly, quickly, and legally with Filedocsphil.
What is required for cancellation of a mortgage in the Philippines?
A notarized cancellation or release of mortgage, the owner’s duplicate title, and supporting documents filed with the Registry of Deeds.
What happens if you cancel a mortgage?
Your title becomes clean and unencumbered, allowing sale, transfer, inheritance, or refinancing.
What is the penalty for cancelling a mortgage?
There is no government penalty. Some banks may charge prepayment or processing fees depending on the loan agreement.
Can you break your mortgage early without penalty?
It depends on the bank. Some allow early payment without penalty, while others impose fees during the lock-in period.
What is the 6-month rule for mortgages?
This is a bank policy, not a law. Many banks restrict prepayment within the first six months of the loan.
