What Is A Deed Of Reconveyance?

As a trusted personal finance writer and mortgage specialist, Maryalene LaPonsie has interviewed hundreds of certified financial planners, CPAs and wealth advisors, and distills their expertise into accessible articles on topics ranging from retirement planning to tax-saving strategies. She is a regular contributor to multiple financial publications, and her work has been syndicated nationwide.

Maryalene LaPonsie

Maryalene LaPonsieMortgages Expert

Mortgages Expert

Chris JenningsDeputy Editor, Loans & Mortgages

Chris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a number of outlets, including Yahoo Finance, MSN, Fox Business, and GOBankingRates.

Reviewed

Chris Jennings

Chris JenningsDeputy Editor, Loans & Mortgages

Deputy Editor, Loans & Mortgages

Reviewed

Published: Jan 31, 2024, 5:00am

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Paying off your mortgage is a financial milestone, one that should be marked with the issuance of a deed of reconveyance. A deed of reconveyance indicates that you’ve fully repaid your mortgage, releases the lender’s lien from the property and shows that you now own the property.

In the U.S., close to half of all states are title theory states that require a lender to issue a deed of reconveyance after a mortgage is paid off. If you live in one of these areas, it’s important that you understand how a deed of reconveyance works.

How a Deed of Reconveyance Works

States are primarily broken down into two categories when it comes to how they handle deeds for mortgaged properties: title theory and lien theory.

If you live in a title theory state. Your lender holds the title to the property through a deed of trust. In this document, the lender is the trustee, and you’re the trustor. Once a mortgage is paid off, the trustee transfers the title of the property to the trustor and a deed of reconveyance is issued, removing the lender’s legal interest in the property.
If you live in a lien theory state. You don’t have to worry about a deed of reconveyance. Borrowers in lien theory states are always in possession of the title, and the lender places a lien on the property.

State laws differ on the timing, but the deed of reconveyance typically must be provided within a certain period—such as 30 days—of when a mortgage is paid off.

Pro Tip

Not every state follows title theory or lien theory. There are 10 states that subscribe to what’s known as intermediary theory. This theory allows the borrower to hold the title but gives the lender the authority to take it back if the borrower defaults on their loan.

List of States By Title Theory, Lien Theory and Intermediary Theory

If you’re paying off your mortgage, take a moment to learn whether you live in a title theory state, lien theory state or an intermediary theory state.

Title Theory States

Lien Theory States

Intermediary Theory States

What Information Is Included in a Deed of Reconveyance?

State laws outline the process by which a deed of reconveyance is issued, and the deeds typically include the following information:

Borrower’s name and address
Lender’s name and address
Legal description of property
Documentation or declaration that the borrower has fulfilled their obligation to the lender
Notarized signature of trustee representative

Depending on your state, the lender may send the deed of reconveyance to you directly or send it to a county clerk or register of deeds office. If the deed does come to you, it’s your responsibility to ensure it’s filed with the county as soon as possible.

In addition, be sure that all information in the document is correct since an incorrect deed could make it difficult to sell a property or transfer a title later. Contact the lender right away if you spot errors.

Why Do You Need a Deed Of Reconveyance?

The deed of reconveyance is essential to proving that you paid off your mortgage and own your home outright. Without it, it will appear another party has a legal right to your property.

Even if you don’t plan to sell your property in the near future, you’ll want to have a deed of reconveyance properly completed and filed to prove you have total ownership. The deed legally transfers the title of the property from your mortgage lender to you and prevents the possibility of a lender later coming back to make a legal claim on your home and foreclose on it.

However, deeds of reconveyance don’t eliminate the possibility of a foreclosure completely. While it means a lender cannot repossess your home, other entities such as a local government or homeowners association may be allowed to foreclose if you don’t pay your taxes or other assessments.

What Happens If a Deed of Reconveyance Isn’t Recorded?

In the event the deed of reconveyance isn’t properly recorded, it could cause problems when you sell your house or otherwise transfer the title.

A title company conducting a search prior to the sale may not be able to confirm that you own the property outright. This, in turn, creates extra steps and an added headache if you need to provide proof that you did indeed pay off the mortgage. It’s in your best interest to ensure that the deed of reconveyance is properly recorded in a timely fashion.

With that said, mistakes happen, and deeds can be overlooked. If you’re unsure whether or not a deed of reconveyance will be issued once you pay off your mortgage, contact your county clerk’s office.