Legal Definitions - defeasance clause

A defeasance clause is a provision in a mortgage agreement that states that the transfer of ownership to the lender will be void if the borrower pays off the debt on time.

For example, let's say John takes out a mortgage to buy a house. The mortgage agreement includes a defeasance clause that states that if John pays off the mortgage in full by the due date, the lender will not have any claim to the property. This means that John will own the house outright and the lender will have no legal right to it.

Defeasance clauses are designed to protect borrowers from losing their property if they are able to pay off their debt on time. They give borrowers the peace of mind that comes with knowing that they will not lose their property if they are able to meet their financial obligations.