Paying out a second mortgage: payout figures, discharge and a clean title

Most second mortgages are designed to be temporary. They fund a specific need, then get repaid from a planned exit: a sale, a refinance, a contract payment or trading income. The payout is where that plan becomes real, and a smooth payout is mostly a matter of asking the right questions early.

This guide walks through how payout figures work, what they include, how second mortgages are paid out at a sale or refinance, and how to make sure the mortgage actually comes off your title.

What is a payout figure and what’s in it?

A payout figure is the amount needed to repay the loan in full on a particular date. It isn’t the same as the balance on your last statement.

Component	What it is
Principal	The amount still owing
Accrued interest	Interest since the last charge, up to the payout date
Capitalised interest	If interest was being added to the loan, it’s in the principal
Unpaid fees	Any fees charged but not yet paid
Discharge fee	Preparing and lodging the discharge
Early repayment amounts	Only if the contract includes a minimum interest period or exit fee
Legal or settlement costs	The lender’s costs of attending settlement, if charged

Ask for the figure in writing, for a specific date, with a daily interest amount so it can be adjusted if settlement moves. Our page on second mortgage costs explains the fees you should have seen at the start; nothing on the payout should come as a surprise.

How do you request one?

1. Contact the lender or its lawyers in writing and ask for a payout figure for your target date.
2. Give your loan account number, property address and the reason (sale, refinance or cash payout).
3. If it’s a sale or refinance, provide your conveyancer’s or new lender’s details so they can coordinate directly.
4. Allow a few business days. Some lenders turn payout requests around quickly; others need notice.
5. Check the figure against your own records and query anything unfamiliar.

If your exit is a refinance, the new lender will usually request the payout figure for you as part of its settlement process.

How does payout work when you sell?

When a property with two mortgages is sold, both lenders are paid at the same settlement, in rank order:

1. The purchaser’s funds are paid at settlement.
2. The first lender receives its payout figure and releases its mortgage.
3. The second lender receives its payout figure and releases its mortgage.
4. Selling costs such as agent commission are paid as directed.
5. The balance comes to you.

Your conveyancer coordinates both lenders. Settlement is now usually electronic, with each lender’s release of mortgage lodged at the same time. In Queensland, for example, the release of mortgage is one of the instruments that must be lodged electronically under the eConveyancing mandate that started in February 2023.

If the property being sold is an investment or business property, capital gains tax may apply to the sale, reducing what’s left after the loans. Your accountant can estimate that before you rely on the net figure. Our page on ranking and priority explains why the order of payment matters.

Planning a sale exit and want to check the numbers stack up? Talk it through with a specialist before you list.

How does payout work with a refinance?

A refinance exit replaces your second mortgage, and often your first too, with a new loan:

1. The new lender approves the refinance and requests payout figures from both existing lenders.
2. At settlement, the new lender pays each existing lender directly.
3. Both old mortgages are released, and the new lender’s mortgage is registered.
4. Any surplus comes to you; any shortfall must be funded before settlement.

Refinancing both loans into one first-ranking loan is the most common exit for a second mortgage used to clear ATO debt, fund growth or bridge a period of light paperwork. See second mortgage vs refinance for how the two-step plan works.

What about paying out with cash?

If you’re repaying from a contract payment, a tax refund or trading income:

1. Request the payout figure for the date funds will be available.
2. Pay exactly that amount, by the method the lender specifies, and keep proof.
3. Confirm in writing that the loan is repaid in full.
4. Ask who is lodging the discharge and when. Don’t assume it happens automatically.

How do you confirm the title is clear?

This is the step most often skipped. A mortgage stays on the register until a discharge or release is registered. If it was never lodged, the next time you sell or borrow, your conveyancer or lender will find an old mortgage on the title and everything waits while it’s tracked down.

A few weeks after payout, order a title search and check the second mortgage no longer appears. Our guide on ordering a title search explains how in each state.

What if the exit is running late?

Exits slip. A buyer’s finance takes longer, a refinance needs another document, a customer pays late. What to do:

• Tell the lender early. An extension agreed a month before the due date is usually simpler and cheaper than one negotiated after it.
• Ask what an extension costs in dollars, and for how long.
• Show progress. A signed contract, an approval letter or an invoice schedule reassures a lender that the delay is temporary.
• Consider a partial repayment if some funds are available now; it reduces the balance and the interest.

This is also where the original term matters. If you built in a margin, as suggested in second mortgage exit plans, a short delay may not need an extension at all.

What if the sale doesn’t cover both loans?

This is rare when a loan starts with a comfortable combined LVR, which is exactly why lenders insist on one. If a sale price is going to fall short, talk to both lenders well before settlement. Options may include funding the shortfall from other sources, agreeing a different arrangement with the second lender, or reconsidering the sale. It’s a conversation to have early, not at the settlement table.

Illustrative example: a clean finish

A business owner took a second mortgage over her home to clear an ATO debt, planning a refinance within 18 months. At month 15, with two clean BAS years lodged, her bank approves a refinance of both loans. The bank requests both payout figures; settlement happens electronically; both old mortgages are released and the new one registered on the same day. Three weeks later she orders a title search, which shows only the bank’s new mortgage. The scenario is illustrative.

What should you keep for your records?

• The written payout figure and proof of payment.
• The lender’s confirmation that the loan is repaid in full.
• The title search showing the mortgage removed.
• For a sale, the settlement statement from your conveyancer.

Keep these with your loan documents. They’re the quickest way to answer any question that arises later.

Planning the next step after payout?

Once a second mortgage is repaid, many owners find their property has become a reliable source of fast funding for the next opportunity. Whether you’re mapping out an exit now or thinking about a new facility, a specialist can help you plan it properly. The enquiry takes around 60 seconds and there’s no credit check when you first enquire.

Your details stay with one specialist; we don’t pass them to a queue of lenders. They’ll look at your current position and call you back with options. Please be precise about any loans still on the title and when they’ll be repaid; accurate timing is what makes the next structure line up with the last one.

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