Partial Release

Posted in Finance, Accounting and Economics Terms, Total Reads: 700

Definition: Partial Release

Partial release is a term referring to a mortgage clause or provision, wherein, the whole or part of the pledged collateral can be released from the contract upon satisfying certain stated circumstances or conditions. The collateral can be property or otherwise. Not all mortgage documents include the partial release provision. However, generally partial release clauses are exclusively seen in mortgages and real estate contracts.

In simpler words, a Partial release is a clause in a mortgage contract, which allows for ‘partial release’ of some of the collateral, upon repayment of some of the loan (partial payment of debt) by the mortgagee. In essence, to this end, partial release is an agreement between commercial lenders and the borrower. It is also known as ‘partial satisfaction’. The partial release clause is commonly found as a addendum to a note and mortgage.

For example, under the partial release clause, if the property owner has repaid a stated portion of the principal, part of the mortgaged property might be released from the collateral. A frequent application of the partial release is found in tract development construction loans and subdivision development mortgages. It can also be found in trust deeds frequently. By exercising the partial release, the borrower can remove some of the collateral from his mortgage loan debt. After this, the borrower continues to make the residual loan payments for the remaining duration of the mortgage contract. Institutions like the Fannie Mae allow a partial release only up to the extent specified in the mortgage loan contract.

An example of a partial release would be, “The commercial lender agrees to release its mortgage against the property (collateral) upon the principal repayment of 20,000 dollars.”

It is to be noted that the borrower cannot be compelled to comply with partial satisfaction unless it is provided for in the mortgage terms, i.e in the absence of a partial release clause, mortgagor cannot compel/force mortgagees to release a portion of his collateral.


Hence, this concludes the definition of Partial Release along with its overview.


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