If the end of your last mortgage payment is on the horizon and complete home ownership is in your near future, it is time to celebrate. In addition to the rejoicing, there are certain tasks to stay on top of that can help the process go smoothly and quickly, so that your final payment is credited quickly and your mortgage lien is cleared.
When you get approximately one to two months away from the date when you will be making your last mortgage payment, it is a good idea to request a payoff quote from your loan servicer or lender, whose contact information is typically found on your monthly mortgage statement.
This quote will help you determine whether the amount you expect to pay is correct. It is possible that your last month’s payment may be higher than you realize. This is because you pay your mortgage in arrears, and you will need to cover the final month’s principal and interest. Furthermore, the amount you owe in interest keeps growing while the loan remains open. It is also possible that you might not owe as much as you think, if you occasionally prepaid the principal in order to pay off the mortgage faster.
“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,” according to Pat Mertz Esswein from Kiplinger’s Personal Finance. 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.
Most states give the servicer 30 days after the payoff to file the release request with the county recorder. Occasionally, servicers do not meet this deadline, so be sure to check that it has been completed on time.
Another thing to consider is that if an escrow account was used to pay your property taxes or your flood, homeowners or windstorm insurance, you need to get the remaining balance back. Servicers have 20 days after payoff to send you a refund check for the remaining balance.
“Once you’ve paid off your loan, you need to tell your insurance carrier that you no longer have a lender on the home,” according to Ilyce Glink and Samuel J. Tamkin in the Washington Post. “If you have a casualty (like a fire or a tornado hits your house) and your lender is still named as a mortgagee on your homeowners policy, you may have to deal with that old lender to get your money.”
Your loan servicer protected its interest in your home by being listed as an “additional insured” on your insurance policy. Once you’ve paid off your mortgage, you can ask your insurers to remove the servicer’s name. You will most likely need to provide copies of the deed and the record release request in order for the request to be granted.
Lastly, to make sure that you have the clear title to your home, you must ensure that the county recorded the release request. That could take anywhere from a week to a few months. You will receive or be able to pick up a copy of the release, including the recording date along with the county’s identifying document number, which will indicate that everything is officially done.
You’ve spent a long time in the process of purchasing your home, so when the end of your mortgage is in sight, keep this information in mind to wrap everything up efficiently.