What is the purpose of a "defeasance clause" in a mortgage?

A defeasance clause serves a specific purpose in a mortgage agreement by stipulating that once the borrower has fully repaid the loan, the lender must release its claim on the property. This clause effectively ensures that the borrower will regain full ownership of the property without encumbrances once their mortgage obligations are satisfied.

This is an important aspect of mortgage agreements, as it provides assurance to borrowers that they will not be held liable for the property or have the lender retain interests or claims after the loan is fully paid off. The inclusion of a defeasance clause enhances the security and fairness of the mortgage process, making it clear that the completion of payments leads to a clean transfer of ownership rights back to the borrower.