The Land Transportation Office (LTO) also offers services like annotation and cancellation of mortgage for motor vehicles (MV). This service is particularly important as doing so will officially transfer the ownership of an encumbered motor vehicle to your name, making you the official MV owner.
This service is particularly important in the advent of secured and credit auto loans. Nowadays, many vehicles are acquired through loans, which means a lot of them are encumbered, requiring the owner to process the annotation and cancellation of [chattel] mortgage and get their name placed as the owner of the vehicle.
What is ‘Certificate of Registration Encumbered’ (CRE)
Vehicles bought through the bank or via a lending company do not get a regular Certificate of Registration (CR). Instead, the owner gets a Certificate of Registration Encumbered (CRE)—an MV registration document that puts the lender as the owner of the vehicle instead of the buyer until such time that the buyer has completely repaid the loan.
The CRE is issued to prove that the motor vehicles or other items of movable personal property, or chattel, is subject to Chattel Mortgage or is used to secure the loan. It also means that the lender who released the funds needed to purchase the vehicle holds an ownership interest in it. Once the buyer has fully repaid the loan, then it is the only time that their name will be placed as the owner of the vehicle. Until then, the MV is registered in the Chattel Mortgage Register as security for the performance of an obligation.
How to Check if a Car is Encumbered
To check if the vehicle is encumbered, you simply need to check the Certificate of Registration (CR). You can tell that the CR is actually a CRE if there is an annotation on it that says “encumbered.”
Where to File for the Annotation and Cancellation of Mortgage
Cancellation of the Mortgage is done at the Registry of Deeds, but filing for annotation and cancellation of Chattel Mortgage can be done at the LTO. However, it can’t just be any LTO office. Changing the registration status of your motor vehicle has to be done at the originating LTO branch office, or the LTO office stated on the Certificate of Registration (CR). This means that if the CR says LTO Manila, it has to be done at LTO Manila. Going to any other LTO branch will simply make you waste your time, effort, and money.
Requirements for Filing for Annotation and Cancellation of Mortgage
Before going to the LTO, you will need to secure and prepare the following documentary requirements to avoid the hassle of having to come back to continue the process.
The requirements are as follows:
- Original and a photocopy of the Loan Contract
- Chattel Mortgage Form
- Two (2) of the following valid government-issued photo ID from the registered car owner
- Driver’s License
- Philippine Passport
- Professional Regulation Commission (PRC) ID
- SSS ID
- GSIS ID
- BIR ID
- TIN ID
- Voter’s ID
- Taxpayer’s Identification Number (TIN)
Once these documents are ready, you may now go to the bank or the lending company who financed your loan to obtain these additional documentary requirements:
- Original Certificate of Registration (CR) of the vehicle
- Latest original and photocopy of the Official Receipt (OR) of payment for the vehicle
- Chattel Mortgage Contract duly-annotated or stamped by the Registry of Deeds (RD)
- Original Registered Promissory Note with Chattel Mortgage
- Two (2) copies of the Release of Chattel Mortgage
- Official Receipt (OR) of payment of the annotation with Registry of Deeds
- Motor Vehicle Inspection Report (MVIR) (Motor Vehicle Inspection Report)
- Confirmation of CR/OR (CIR-91-137) if issued by other LTO Agency
Note: You will need to have some funds at hand as you will be charged for the notarial fee to get the documents notarized before it can be released. The notarial fee ranges from P300.00 to P400.00.
How to File for Annotation and Cancellation of Mortgage for Motor Vehicles
To file for annotation and cancellation of Chattel Mortgage for your vehicle upon paying off your auto loan, then here are the steps to follow:
Step 1. Make sure that your registration is up-to-date and that there are no pending penalties on the documents.
Check whether the registration is up-to-date and if the vehicle is free from violations and penalties. Do not forget to also check for any discrepancies on the documents. Get the bank or the lending company to correct the documents (if needed) and confirm its availability for pick-up. Some buyers, especially for pre-owned vehicles, forget to check these things, resulting in more problems and hefty fees later on.
Step 2. Secure and prepare the documentary requirements.
Prepare the required documents and make sure you get them duplicated properly. Some documents need to be photocopied so make sure you have enough duplicates for record keeping and for submission. You will also need to get the other documents notarized, so make sure you have enough funds to do so.
Step 3. Check the office of the Registry of Deeds (RD) where you should cancel the mortgage.
Once you have the documents prepared, proceed to the Registry of Deeds (RD) where the mortgage was registered. You should see this in the stamp on the original Registered Promissory Note with Chattel Mortgage. If it isn’t, it should also be in the original CR under the space for RD.
Step 4. Accomplish the necessary forms and submit the requirements at the designated RD.
At the RD office, you will be asked to fill out a form then submit it together with the following documents:
- Original Registered Promissory Note with Chattel Mortgage
- Release of Chattel Mortgage
- One (1) copy of your two (2) valid IDs (Driver’s License, Philippine Passport, PRC ID, SSS ID, GSIS ID, BIR ID, TIN ID, Voter’s ID).
Step 5. Before it can be processed, you will be asked to pay for some fees at the cashier—the amount of which will vary depending on the amount of your mortgage.
Processing Time for Cancellation of Mortgage
The processing time for the cancellation of the chattel mortgage may vary depending on the branch and whether the person who will sign is present at the time. That said, the processing time for the cancellation of the chattel mortgage at the Registry of Deeds could range anytime from a few hours to about two to three days.
Step 6. Once you receive the official document for the Cancellation of Chattel Mortgage, you may proceed to the designated Land Transportation Office (LTO) branch to have it removed from your vehicle’s Certificate of Registration (CR).
Step 7. At the designated LTO branch, tell the personnel that you would like to process the cancellation of encumbrance for your vehicle.
Step 8. Proceed to the transaction counters and submit all the following documents to the Evaluator for evaluation and computation of fees.
- Release of Chattel Mortgage (duly stamped by the Register of Deeds)
- Official Receipt from when you paid for the cancellation.
Step 9. Once completed, proceed to the actual inspection of motor vehicles with duly accomplished MVIR (Motor Vehicle Inspection Report).
Step 10. Proceed to the Cashier when your name is called for the necessary fees and obtain an Official Receipt (OR).
Step 11. Surrender the Original LTO Certificate of Registration with “Encumbered” on it.
Step 12. Wait for the LTO personnel to print out a new LTO Certificate of Registration (CR) without the “Encumbered” annotation on it.
Step 13. Proceed to the Releasing Counter when your name is called to obtain the Certificate of Registration (CR), plates, stickers, and other requested documents.
Note: You will also need to pay for the new Certificate of Registration (CR) without the “Encumbered” annotation. The price ranges from P280.00 to P350.00.
Important Reminders
For your reference, here are some reminders worth taking note of.
- The annotation and cancellation of mortgage officially transfers the ownership of a motor vehicle acquired through a loan from the lender to the buyer.
- The process involves two (2) steps: cancellation of mortgage and official removal of the encumbered annotation from the LTO Certificate of Registration.
- The process requires the cancellation of mortgage first as it is a requirement before the encumbered annotation can be removed from the CR and a new CR can be issued.
- There’s a separate fee for the cancellation of mortgage and for the removal of the encumbered annotation on the LTO CRE and conversion to LTO CR.
- New MV plates, stickers, and other documents will be issued along with the LTO CR without the encumbered annotation.
Video: Annotation and Cancellation of Chattel Mortgage
Learn more about how to process the annotation and cancellation of chattel mortgage for motor vehicles by watching this video from MamiZang Vlog:
Frequently Asked Questions (FAQs)
To help you complete the annotation and cancellation of chattel mortgage for motor vehicles, here are some common questions and answers about it.
1. What is the annotation of Chattel Mortgage?
The annotation of chattel mortgage refers to the conditional sale of personal property, in this case, a motor vehicle, as security for the payment of a loan to purchase the motor vehicle, given by a bank or a secured loan provider, under the condition that the sale shall be void upon the seller paying to the purchaser a sum of money.
2. What does it mean to have an “encumbered” vehicle?
An “encumbered” vehicle refers to a motor vehicle purchased via a bank or a secured auto loan. This means that the ownership of the vehicle is under the lender until such time that the buyer repays the amount paid for the vehicle in full.
3. Does LTO process cancellation of mortgage?
No. The actual cancellation of chattel mortgage is done at the Registry of Deeds. The LTO only handles the removal of the “encumbered” annotation from the LTO Certificate of Registration.
4. How much does it cost to cancel the Chattel Mortgage?
There is no specific amount to pay for the cancellation of Chattel Mortgage as it will depend on the amount of the mortgage. Other expenses include payments for notarial services.
5. Is the removal of the encumbered annotation in the Certificate of Registration at the LTO free?
No. There is a fee and it ranges from P280.00 to P350.00 to remove the encumbered annotation in the Certificate of Registration at the designated LTO branch.
Summary
Annotation and cancellation of Chattel Mortgage is an important step to take especially for those who acquired their vehicle through a bank or a secured loan. This process ensures that the vehicle ownership is transferred to the buyer after paying for the loan in full. It also ensures that the motor vehicle is removed from the Chattel Mortgage Register and that it would no longer serve as the collateral for the loan taken out by the buyer. Not only that, it is also a required procedure in order to replace your LTO CRE with an LTO CR.
The process for annotation and cancellation of Chattel Mortgage involves both the procedure for cancellation of mortgage and the official removal of the encumbered annotation from the LTO Certificate of Registration. It starts with the cancellation of the mortgage first so the car owner will have the requirements for the removal of the encumbered annotation from the CR and a new CR can be issued.
Contact Information
For more information or to address your concerns or inquiries regarding the Annotation and Cancellation of Chattel Mortgage, you may reach out to LTO via the following contact information:
Land Transportation Office (LTO)
LTMS portal: Visit the LTO’s official website and fill out their Contact Us form at https://portal.lto.gov.ph/ords/f?p=PUBLIC_PORTAL:CONTACT_US:115716301949471.
Phone call: You may contact them at their telephone number (632) 922-9061 to 66.
Email: You may also send them an email at clientcare@lto.gov.ph.
LTO Text Hotline Service: You may use LTO’s nationwide SMS service for drivers and vehicle owners by typing LTOHELP and sending it to 2600
LTO office: For information, you may check the LTO branch offices closest to you.