What is the role of the Defeasance Clause in a mortgage agreement?

The Defeasance Clause in a mortgage agreement is significant as it serves to extinguish or eliminate the lender's interest in the property once the borrower has fully satisfied the terms of the mortgage. This means that once the borrower makes all required payments as per the agreement, including any interest and principal, the lender's claim to the property is terminated. It is an essential part of the mortgage contract because it assures the borrower that they will regain complete ownership of the property once their financial obligations are met.

In essence, the Defeasance Clause protects the borrower's rights by confirming that they will not be at risk of losing their property to the lender after fulfilling their obligations. Thus, the inclusion of this clause in a mortgage agreement provides clarity and peace of mind to borrowers regarding the termination of the lender's interest.