Reconveyance: Definition, Example and Related Terms
What is Reconveyance ?
Here's how it typically works: When you take out a mortgage to buy a house, the lender gives you the money, but in return, they get a security interest in the property. This is often done through a deed of trust, where a third party, known as the trustee, holds the title to the property until the loan is paid off.
Once the loan is fully paid off, the lender notifies the trustee, and the trustee then transfers the title back to you, the borrower. This transfer of title is called reconveyance. It's an important process because it officially records that you now own the property free and clear of the debt.
Reconveyance is a key concept in real estate and property law. It ensures that the borrower's ownership rights are fully restored once the debt obligation is fully met.
Example(s)
Scenario Description A homeowner has been paying off their mortgage for 30 years and has made their final payment. Upon receiving the final mortgage payment, the bank notifies the trustee. The trustee then issues a deed of reconveyance, officially transferring the title of the property back to the homeowner. This deed of reconveyance is recorded with the county recorder’s office, indicating that the homeowner now fully owns the property without any liens. A small business owner took out a loan using his commercial property as collateral. After successfully paying off the loan, the lender instructs the trustee to reconvey the title back to the business owner. The trustee prepares and records a reconveyance deed, removing the lender’s lien and restoring the property title solely to the business owner.