How to lift the encumbrance on a mortgaged apartment

What is an encumbrance on a mortgaged apartment

When you purchase real estate with a mortgage, you register the ownership in your name, but transfer the apartment to the bank as collateral. This guarantees payment of the loan even in the event of unforeseen situations: job loss, disability, and so on.

The bank, in turn, imposes an encumbrance on the housing — certain restrictions on actions with the real estate. For example, while your apartment is pledged to the credit organization, you cannot:

• sell it without the bank's permission;
• exchange it for other real estate;
• give it as a gift to a close relative, and so on.

Often, banks even prohibit renting out the collateralized real estate or registering third parties in it. The organization specifies all these restrictions in the loan agreement. By signing it, you agree to these terms.

When you can lift the encumbrance on a mortgaged apartment

Lifting the encumbrance on a mortgaged apartment is only possible when you have fully closed the debt to the credit organization. Moreover, it does not really matter whether you paid off the mortgage according to the schedule or ahead of schedule — as soon as you make the last payment, you can submit documents to lift the pledge on the real estate. 

You can also lift the encumbrance on the apartment before paying off the mortgage, but only if you are selling the mortgaged real estate in agreement with the bank. 

Please note that you can lift the encumbrance on a mortgaged apartment only by providing one of the following documents:

• a certificate of ownership obtained as a result of selling the property at an auction;
• a judicial document confirming the closure of the mortgage;
• a mortgage note with a record of full mortgage repayment;
• an application to lift the mortgage encumbrance from the owner and the bank.

What is needed to lift the encumbrance on an apartment

Removing an encumbrance from a mortgaged apartment always follows a standard procedure. This means that no matter how you submit your application, you will need the same set of documents and state duty. Let's discuss this in a bit more detail.

Documents

As mentioned above, as soon as you fully pay off your mortgage, you can apply to remove the encumbrance on the collateral property. To do this, you need to provide the following documents:

• a certificate from the bank confirming no outstanding debt;
• a certificate of state registration of ownership;
• a copy of the credit agreement;
• identity documents of all property owners;
• the building commissioning permit, if you purchased the apartment under a shared construction agreement;
• the apartment acceptance certificate, also if you purchased it under a shared construction agreement.

If you submit the application through an authorized representative, you will also need a document confirming the representative's authority: an order, a power of attorney, and a passport. 

State Duty

There is no state duty as such for removing an encumbrance—this service is completely free of charge. However, you will not receive any documents from the Unified State Register of Taxpayers. 

If you require a new certificate of state registration of ownership without the encumbrance mark, you will need to pay a state duty of 350 RUB. Please note that the document will be issued to you in electronic format. You can also order an extract from the USRN, which costs 370 RUB.

How to lift the encumbrance on a mortgaged apartment

Removing an encumbrance from an apartment takes place in several stages. First of all, you must fulfill all obligations to the bank. After making your final payment, make sure that it has gone through and that you have fully closed the mortgage. You can clarify this information at a branch of the credit institution or by calling the hotline. 

If you are closing your loan ahead of schedule, don't forget to submit a corresponding application so that the bank can write off the required amount from your account. Otherwise, the lender will continue to deduct monthly payments according to the schedule. 

Next, you need to request certificates from the lender confirming that you have fully fulfilled your obligations under the agreement:

• a certificate of full loan repayment;
• a loan account statement showing a zero balance on your mortgage. 

Most often, when signing a mortgage agreement, the bank and borrowers also execute a mortgage deed (zкладная), which acts as a guarantee for debt repayment even in unforeseen circumstances. Thanks to this document, the lender can foreclose on the client's property to pay off the mortgage. The bank can also resell the debt to a third party or assign the claim rights.

After you have fully paid off the mortgage, you need to submit an application to the bank for the return of the mortgage deed. The maximum timeframe for receiving this document is one calendar month.

Next, all you have to do is submit an application to the MFC (My Documents center) to remove the encumbrance on the apartment. To do this, you need to bring the documents listed above, including the debt repayment certificate and the mortgage deed.

If you have an electronic signature, you can submit the application through the Gosuslugi portal or on the official website of Rosreestr. 

How quickly the encumbrance on the apartment will be lifted

The longest part of the entire apartment encumbrance removal procedure is waiting for the mortgage deed from the bank. As mentioned above, obtaining this document can take up to one calendar month. The actual removal of the property encumbrance after submitting the application to Rosreestr will take no more than a week.

Please note that if you send the documents to Rosreestr via Russian Post, this timeframe may be somewhat delayed.

Why you may be denied the lifting of the encumbrance on a mortgaged apartment

There are only two reasons why you might be denied the removal of an encumbrance on a mortgaged apartment:

• if the bank failed to make a note of full mortgage repayment due to a technical issue;
• if you submitted an incomplete package of documents to Rosreestr.