A homeowner’s greatest desire when signing a mortgage is to see the day come when the mortgage is paid off. Some people are tempted to pay off their mortgage early in order to save on interest rate payments and leave their financial health behind after the last payment, which can lead to financial problems.
However, that day of making the last payment will eventually come and it is very possible that you will find yourself in any of these three situations: When you refinance your mortgage, when you sell your home or when you make the last payment to pay off the loan. Here are 10 steps to pay off your mortgage and their details.
10 steps of mortgage payoff procedure
1. Request a mortgage payoff statement
This is the first step in paying off a loan. A payoff request is a statement prepared by your lender which details the payoff amount for prepayment of your mortgage loan.
The payoff statement will typically be the remaining balance on your mortgage loan, but it might also include any accrued interest or late charges/fees that could be owed. The repayment request may also include details such as the remaining payment schedule, the interest rate, the amount of interest to be repaid per prepayment and, finally, it will include a “validity date”, which means that your repayment amount will only be viable until that specified date.
2. Pay all your additional fees
It is likely that in your state there are additional fees to be charged in addition to your mortgage payment. For example, in some states you have to pay a $30.00 filing fee and a $14.00 recording fee. This represents just one last hit on the mortgage company’s side before they will release you.
3. Get a certified check or ask for a wire transfer
Mortgage companies may not accept regular online payments or a personal check for the final payment. In that case, there is an option to request a certified check or wire transfer from your bank. After you have requested the check or wire transfer you can verify online that your balance is already at $0.
4. Inquire about your escrow balance
Depending on when you pay off the loan you will more than likely have an escrow balance containing funds for future payments to your homeowners insurance and property taxes.
Ask your mortgage company about your escrow current balance and how much you’ll be receiving back. We advise you not to spend money as you will need it later to pay these bills manually.
5. Contact your homeowner’s insurance provider
Now you need to contact your homeowners insurance provider.Since you do not have an escrow account now, you will have to pay your homeowner’s insurance from now on, contact your homeowner’s insurance provider and let them know that you have paid off your mortgage and will be making payments. Ask them about automatic billing options so you don’t accidentally miss this important payment.
6. Contact your city township office
Like homeowners insurance, your property taxes were paid through escrow, so now you are responsible for paying them. Contact your city offices and let them know that you have paid off your mortgage and are now going to make your property tax payments.
7. Cancel your automatic mortgage payment
If you still don’t cancel your automatic mortgage payment for next month, you may accidentally pay more than you intended. Log in to your online account and make sure you’re all set.
8. Adjust your monthly budget
Tracking your spending and saving is even more important now that your mortgage. Feel free to plan a sinking fund for your homeowner’s insurance and property taxes and your monthly budget. You don’t want these large expenses to surprise you in the future. It’s also time to make some important decisions about your newfound money.
9. Receive an official letter from your FORMER mortgage provider
Around 30 days after you make you final payment you’ll receive an official letter from the mortgage company stating that your loan is paid in full you want to keep this one for your records or you can frame it like we did .
10. Get your mortgage release documents
Your mortgage company will produce mortgage release documents that prove the mortgage is no more be sure to speak with your lender to understand when these documents will be sent to your county clerk for processing.
You should also receive a copy of these documents that you’ll keepfor your records. Depending on your specific situation you may need to go to the county clerk to get a copy yourself.
Will it be a good idea to pay off my mortgage early?
Although the idea of liquidating your mortgage sounds like a dream, it is convenient to know before making this decision if you have enough money, if you have taken into account all the available alternatives within your reach, among other factors, to avoid making a mistake that could end up hurting you in some way.
So if you are having a hard time making a decision on your own, consider consulting with a local financial advisor or you can also contact our customer service department at (800) 931-2424 x651, or email customerservice@myfci.com so they can give you the advice you need.
Discussion