Every homeowners dream is to be able to pay off their mortgage and live in a free and clear home. Many homeowners do not even think about paying off their home loans and think it is almost next to impossible for anyone to have a home without a mortgage. However, there are folks who do have goals and strive very hard to reach that goal of paying off their mortgage. Those homeowners who accomplish the hard task of having their mortgage paid off do deserve the bragging rights and it is an impressive goal and accomplishment. The very few and proud homeowners who do pay off their mortgage loans need to make sure that after making the final mortgage payment of their home, that the lien on the property has been released off the title to the property by their mortgage lender so in the event if they need to sell their property at any given time, there are not going to be any red tape. All FHA Loan programs require escrows for property taxes and homeowner’s insurance so once the mortgage loan has been paid off, the escrow requirements for your property taxes and insurance will be the sole responsibility of the homeowner.
Things You Must Know About Paying Off Your Mortgage Prior to Final Payoff
As you are nearing the finish line of paying off your mortgage, there are several things you must know about paying off your mortgage prior to your final mortgage payment due. One of the things you must do is to ask for a final payoff figure from your mortgage lender about 45 to 60 days before you last and final payment of your mortgage. Homeowners need to understand that mortgage borrowers pay their mortgage loan payments in arrears and because they are paying in arrears, homeowners may actually owe more mortgage balance then they think they owe. For example, if a homeowner has a mortgage payment that is due this month and they pay their payment now for this month, this month’s payment is covering the previous month’s principal and interest payment. The interest clock is always ticking, day or night. Interest is added on every minute of every day. If you are one of those homeowners that have been paying extra housing payments than the minimum monthly due, you will be surprised when it comes out that you owe substantially less than what you have thought you owe on it.
How Do You Pay Off Your Mortgage?
Homeowners with mortgages have a mortgage loan servicer who service their mortgage loan. The loan servicer’s responsibility and scope of their work is to make sure that the borrower’s accounting records, including escrows, are accurate and monthly statements gets sent out on time and record the payments made by borrowers are logged in correctly. When a homeowner asks for a payoff on a mortgage loan, the mortgage loan servicer is the agent processing the payoff statement to the homeowner or to the mortgage lender who is requesting a payoff on behalf of the borrower. Upon a payoff request by the borrower, the loan servicer needs to prepare the correct payoff figures and make sure that the payoff letter gets sent out to the borrower or borrower’s power of attorney within seven days of the payoff request. The loan servicer will state the date that the loan payoff will be good until and if that date passes, there will be additional daily mortgage interest that will accrue. There are fees and costs in paying off a mortgage. Besides the final principal and interest payment, borrowers will need to pay recording fees to the county recorder’s office for releasing the mortgage lien for the title of the property. The mortgage lender may also have additional fees and costs such as processing fees, wire transfer fees, unpaid fees, as well as late fees if applicable
Release of Escrows When You Pay Off Your Mortgage
There are other tasks required by the mortgage loan servicer when you pay off your mortgage. Most borrowers will have an escrow account with their loan servicing company. When you pay off your mortgage, the escrow account also needs to be closed out. One of the roles of the mortgage loan servicer is to escrow your property taxes and homeowner’s insurance and pay them when it was due. Since the loan servicer will no longer be servicing your mortgage loan, they will need to close out your escrow account and refund you any remaining funds that is held in your escrow account within 20 days of your loan payoff and need to zero out and close your escrow account. Make sure that you get confirmation of the closing out of your escrow account and check in with your homeowner’s insurance company and the county’s property tax division to make sure that they have the proper address where to mail you future insurance bills and property tax bills that is due. Get the proper due dates so you are not late and are not assessed a late payment fee or have the risk of your home being uninsured. Automatic online payment setups is a good way of making sure that your bills will get paid timely but make sure that you have sufficient funds in your bank accounts.
When Do You Get Free and Clear Title to Your Home
Many homeowners think that just because the loan servicer shows a statement with a zero balance on your mortgage that you own your home free and clear. This is not the case. You will only have free and clear title to your home when the county recorder’s office records the release request. This can take from a few days to several weeks. You officially own your home free and clear when you physically get a copy of the release that shows the recorded date as well as the identification doc number from the county recorder’s office. There are several ways that you can get possession of this release. You can request it to be mailed to you or you may have an option to pick it up at the county’s recorder’s office.
When you contact your homeowner’s insurance company to tell them that you have paid off your mortgage, make sure you tell the insurance company that the loan servicer is no longer the additional insured and have them remove their name off your homeowner’s insurance policy. Your homeowner’s insurance company may ask for a copy of the recorded release request as well as a copy of your deed.
by Gustan Cho