The reduction in the principal of a mortgage loan by the lender (mortgagee). The write-off makes the amount a borrower (mortgagor) owes lesser, and as a result reduces the interest payment for a borrower. The write-off rate depends on a lender’s estimation (in light of market analysis) of the ability of borrowers to make timely and contractually repayments due to the market situations and other relevant factors.

If certain events happen, the mortgage can be written-off in its entirety. Such events include foreclosure, termination of the principal engagement, the release of the mortgage by the lender, etc.