finance
defeasance clause
A defeasance clause is a provision in a mortgage or deed of trust that requires the lender to cancel the lien and release the property once the borrower has paid the loan in full. In a title theory state, it requires the lender to reconvey legal title to the borrower. The lender typically records a satisfaction of mortgage or a deed of reconveyance to clear the public record.
- Exam tip
- Defeasance "defeats" the lender's interest at payoff. Do not confuse it with the acceleration clause, which makes the full balance due upon default.
- Example
- After a homeowner makes the final payment on a 30-year loan, the defeasance clause obligates the bank to record a satisfaction of mortgage.
Related terms & state variants
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Last verified: 2026-10-23