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

The purpose of a defeasance clause in a mortgage primarily serves to protect the borrower. This clause allows the borrower to regain full ownership of the property once they have fulfilled their obligations under the mortgage, such as making all required payments. Essentially, it states that upon meeting the terms of the loan (typically full repayment), the lender's claim to the property is nullified, ensuring that the borrower is no longer encumbered by the mortgage. This helps provide the borrower with assurance that their interest in the property will be restored once the debt is satisfied, reinforcing their ownership rights.

The context of the other options hinges on who primarily benefits from the defeasance clause. While the lender does have a vested interest in ensuring payment, the clause is structured primarily to benefit the borrower by ensuring that they can reclaim clear title to the property upon fulfilling their loan obligations.