Advertisement
real estate

What You Must Know About Paying Off Your Mortgage

Your last mortgage payment is in sight. Now what?

Owning a home free and clear is an impressive financial milestone. You’ll want to take steps to make sure your final payment is credited quickly and the mortgage lien is cleared from your title so you can sell your home when you want without extra hassles. Plus, your homeowners insurance and property taxes will no longer be paid from an escrow account, so the bills will be your responsibility.

Advertisement - Article continues below

About 30 to 60 days before you expect to make your last payment, ask for a payoff quote from your lender or loan servicer (look for contact information on your monthly statement). Consumers often miss this opportunity to simplify the payoff process, says Bill Pinkerton, a senior vice president at Wells Fargo Home Mortgage. Because you pay your mortgage in arrears, you could owe more than you think: This month’s payment covers last month’s principal and interest, and the tab for interest grows daily while the loan remains open. Or you could owe less than you expect if you occasionally prepaid principal.

The loan servicer generally must deliver a payoff quote within seven days of your request. Your servicer will set an expiration date for the quote, after which interest will again accrue. In addition to the final month’s principal and interest, you’ll pay a fee (usually $25 to $50) to file a request with your county’s real estate recording office to release the mortgage lien from your title. You could also owe a prepayment penalty if required by your loan terms, plus any unpaid late fees. For the final payment, your servicer may require a wire transfer from your bank account (which will cost about $15 to $20) or a cashier’s check ($7 to $10).

Advertisement - Article continues below
Advertisement
Advertisement - Article continues below

In most states, the servicer must file a release request with the county recorder within 30 days of payoff. Servicers sometimes fail to meet the deadline, says Paula E. Meyer, a real estate lawyer in Orange County, Calif. In such cases, she sends a demand letter to the servicer by certified mail, which, depending on the state, may trigger a penalty against the servicer.

Do-it-yourself escrow payments. If the servicer paid your bills for property taxes and homeowners, flood and windstorm insurance from an escrow account, it must send you a refund check for any remaining balance within 20 days of payoff and close the account. Call your insurers and tax department to make sure you’ll receive the bills in the future, and confirm the due dates. Consider setting up automatic payments from your checking or credit card account.

Even if you’ve received a confirmation letter from your servicer and your account shows a zero balance, you won’t hold clear title to your home until the county has recorded the release request, which could take a week to a couple of months. It’s a done deal when you receive a copy of the release showing the recording date and the county’s identifying document number. Either the loan servicer or the county will mail it, or you may have to pick it up from the recorder’s office.

Your insurance policy or policies list your loan servicer as an “additional insured” to protect its interest in your home; ask the insurers to remove the servicer’s name. Before they do, they’ll probably ask you for copies of the recorded release request and your deed.

When you receive the original, now-canceled mortgage note, file it—or frame it. And give yourself a well-deserved pat on the back.

Advertisement
Advertisement

Most Popular

7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020
Shrink Your RMDs in 2021 and Beyond
annuities

Shrink Your RMDs in 2021 and Beyond

QLACs are a special type of annuity that lets you cut RMDs from your IRAs next year and beyond, reduce the taxes you pay and guarantee more lifetime …
August 6, 2020
How a Second Stimulus Check Could Differ from Your First One
Tax Breaks

How a Second Stimulus Check Could Differ from Your First One

The HEROES Act, which was passed by the House in May, would authorize a second round of stimulus checks. While the new payments would be similar to th…
July 22, 2020

Recommended

8 Tips and Warnings on PPP Loan Forgiveness
loan forgiveness

8 Tips and Warnings on PPP Loan Forgiveness

Not having to pay back Paycheck Protection Program loans is a huge benefit for small-business owners. But there are a lot of rules that must be follow…
July 21, 2020
How the Fed's Moves Affect You
Economic Forecasts

How the Fed's Moves Affect You

It’s pumping trillions of dollars into the economy and keeping rates near zero. Savers are sunk, but borrowers get a boost.
July 2, 2020
8 Benefits for Healthcare Workers, First Responders in the HEROES Act
loan forgiveness

8 Benefits for Healthcare Workers, First Responders in the HEROES Act

Parts of the massive federal stimulus passed by the House of Representatives focus on workers on the front line of the coronavirus battle.
May 21, 2020
The Stunning IRS Ruling That May Bankrupt Small Businesses That Took PPP Loans
small business loans

The Stunning IRS Ruling That May Bankrupt Small Businesses That Took PPP Loans

The Paycheck Protection Program rolled out with great fanfare to help save small businesses during the coronavirus pandemic. But something the IRS jus…
May 8, 2020