Mortgage questions
16Sooo, we are lucky enough to be able to pay off our mortgage early next year. If I continue on the current payment amount, I will clear the debt by January. The maturity date is actually August. Since I am not on the mortgage, I cannot ask these questions to the mortgage company, so I was hoping one of you all had some information. 
I have read online that the final payment has to be a certified check?? Even if I am not doing an early buyout, but paying the amount due? Does the lien on our house go away automatically with the final payment or do I have to ask the mortgage company to do that? If the maturity date is after the property tax lien date of our jurisdiction, (July, I think is the date), will they continue to bill escrow amount and pay next year’s taxes or do I have to plan to pay those myself? Anyone have any good suggestions on what is the best way to save up for the payments that are normally in escrow, i.e. property tax and insurance? Any other gotchas that I should anticipate with the closing of this loan? I expect that with two kids on their way to college, this freedom from debt won’t last long!!!
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This is a very weird place for this question.
@peterIrwin yeah… it is a weird place… but that add topic button was beckoning to me
and there are LOTS of knowledgeable people here!
@mikibell @peterIrwin They don’t come much weirder than this place.
@peterIrwin ssseeee lots of people who have done this before…
@mikibell @peterIrwin this is a very wierd place for everything
The answers are going to vary a lot based on where you live, what kind of loan you have, and who your lender is.
Basic stuff: What Happens When You Pay Off Your Mortgage?
I’ve never heard of the “certified check” thing unless your lender requires it or you don’t trust them and want proof of a check sent.
I was using direct transfers from my online bank account to make mortgage payments, and I paid the balance (early) the same way. The mortgage company then mailed me all of the paperwork showing the loan was paid, a printout showing payments made from escrow, upcoming payment dates for my insurance and property taxes, a check for the money that was in escrow at the time the loan was paid, and returned my VA eligibility certificate. Your mortgage company may actually do nothing except close the loan, with no paperwork (or return of money in escrow) until you ask specifically for that. YMMV.
I directly notified both my insurance company and the state revenue office so they could change the billing address to me and take the mortgage company off the documentation. The mortgage company should also do this, but some don’t. One thing you can count on: the second they close the loan, they will not make any further payments to either your insurance or property taxes, even if a payment was due the next day.
I now have the state revenue office notify me by e-mail when they assess the house for taxes, when they set the amount due for the year, and when the due dates are for payments of property taxes. My state allows me to do everything online including paying the property taxes. Same for insurance. Again, YMMV depending on your location and who your insurance is with. I also keep a physical calendar and put reminders in bright colors to check this stuff - because I do not want to miss making a payment.
One easy way to deal with ins/tax is to set up a simple passbook saving account with your bank and have a set amount transferred to it each month, like your own little escrow account, and pay your taxes and insurance from that.
Yep, I pretty much agree with @rockblossom. My mortgage was with my credit union, so they took my payoff out of my account, sent all of the paid off info and stuff (technical terms) to the courthouse and I got a copy of the new legal entry showing that my house was mine w/no mortgage.
I did contact my insurance company and prop. tax address (county) myself.
As for property taxes – I just take that out of my loose change when it comes due in December and May.
@Barney I pay my property tax twice a year. Otherwise the annual bill would be nearly impossible to cough up all at once.
And here I thought if I owned my house, that was a great thing that many Americans never achieve. It didn’t take long to recognize even though I own my house outright, I really never own my house outright.
@Barney @ruouttaurmind @rockblossom @mikibell
Congratulations Miki! I too pay my own property taxes–they let us split them into two payments around here. My insurance I pay monthly, just because it’s easier to have them pull it out of my checking rather than remember to pay it. I asked my credit union to file the deed and release of mortgage at the courthouse–I think they might have nicked me for the filing fees (nominal amounts) on the way out.
@Barney @rockblossom @ruouttaurmind @therealjrn thank you all… Thought that might be the case. Very frustrating to do the balancing, and not have the ability to ask them questions
I have like an old vacation type club at my credit union. I think I will pay myself the tax/insurance money there. Good idea about the monthly payment, if they will do that.
Luckily, or not so luckily, car taxes are due on same dates as personal property taxes, so no post its needed
@Barney @mikibell @rockblossom @ruouttaurmind @therealjrn Congratulations Miki! Two months ago I paid off my mortgage, transferring money from a credit union account into the mortgage. The week before I had requested a written payoff cost for a specific date. They sent it, the credit union transferrd the money, and about a month later I got my payoff notice. Starting next month, I’ll be autopaying into a separate account for taxes and insurance.
I concur with @rockblossom on this:
Laws and policies will vary significantly by state and county, so any responses you receive will be YMMV.
I fought a long battle with my mom when she was desperately trying to pay off her mortgage. She was within a couple years of the end of the note, and was throwing every nickle and dime she could scrape up to reach the goal line.
My problem with this: she was carrying other loans with much higher interest rates and non-deductible interest. for example she had three years left on her car payments, financed at 6.9% while her mortgage was fixed at just under 3.1%. She also carried a few thousand dollar balance on a credit card (do NOT get me started on the criminal interest rates cards charge these days!).
Of course, smart money says pay off the smaller, higher interest loans first. But she was so focused on reaching that 30 year dream, she just got headstrong.
@ruouttaurmind
Not at all like her son, huh?
@Barney Moi?
@ruouttaurmind I am totally resisting the urge to pay the mortgage off earlier
we were lucky to buy a house that was undervalued in a town with a high tax rate, which all was re evaluated, but people were not interested in buying in our town for a while. All of our pre-payments were before kids. I am refinancing all the rest of our debt to a short term low interest loan, thus paying off the higher rate first! Leaving the mortgage and car loan in place, because 6 months left on mortgage and my credit is suffering because I haven’t had loans in my name for a while (so freaking stupid).
love this steady pay schedule! Keep your fingers crossed that we both stay employed!
After many years of my husband being under employed and stealing from peter to pay paul, I am to the point where I can stop stealing
My mortgage company wanted a certified check and sent by a specific date. They calculated the interest to the penny for a particular payoff day. If the check had arrived the next day, the interest would have increased. I know they were charging me mortgage insurance as well as escrow for taxes. Could be they were just annoying. I was just pleased to be done owing that bill although I did just swap it for the taxes. They did all the paperwork and returned my escrow without any problems.
It bothers me that I can’t get information on stuff that not in my name even when they cash the checks I sign. I understand some semblance of security but the checks at most places is nominal at best.
Them: I need to talk to him.
Me: Here he is.
Them: Can I talk to her?
Me: Yes.
Them: OK.
Congrats on the payoff!
@speediedelivery EXACTLY what happens. Especially since I am on the deed!!
Thank you!
@speediedelivery
Financially speaking, if your mortgage rate is close to the the inflation rate why not use the bank’s money for, basically, free? I can earn more in ETFs than the interest on my mortgage costs.
@ThatsHeadly Risk mitigation, for one.
Unemployment, long-term illness, or death of a spouse are real things that happen to real people. Unemployment also has a correlation with the economy tanking.
So, the economy tanks, and you lose your job. Since the economy tanked, your investments are only worth about 50% what they were, and they are not longer enough to pay off your mortgage. And you’ll still have to live somewhere. This is a low-probability event, but it’s a very high-cost event.
Risk in investment is a very real thing. It’s not just a dial you can crank up for higher gains.
Also, real returns are expected to be lower in the coming decades, closer to current mortgage rates.
Also, a lot of (most?) people also don’t have the discipline to actually invest the money the are not putting into their mortgage, and would instead spend most or all of it immediately.
I’m not going to argue that it is unquestionably the correct decision to pay off your mortgage early, but there are a lot of legitimate reasons to do so.
You’ll want to get a lien release (aka quit claim deed) from the lender and file it with the county deeds clerk. That gets the lender off your title. You bet your bottom dollar they made sure they were on your title like stink on shit when you signed the loan paperwork. So make sure they don’t have a claim when they have no right to retain one.
You’ll have to manage your own budget for the taxes and insurance.
Once your loan is paid, you are just an expense to them, so they have zero incentive to unfuck you when they’re done with you.
I don’t recall ours wanting a certified check for that payment. If you aren’t on the mortgage, make sure your name is on the deed. If your spouse (I presume) should pass, you don’t automatically get the house…it would have to be probated and any outstanding bills in the others name would have to come out of the sale. If your name is on the deed… that will not happen. It’s been a long time since we paid off the mortgage so things may be different now but everything was complete with that last payment.
As far as taxes and insurance, we just paid those like any other bill that came due. I’m in Alabama… the insurance is higher than the property taxes. Heck… the electric bill can be higher than the property taxes.
I have not yet paid of my mortgage (another 8 years ) but my understanding from friends who have is you need to follow up to make sure they quit claim to the lien in the house long before you sell and that this process can take about a month.
Congratulations on mortgage payoff.
You can take your taxes and insurance and divide the total in 12 so you always put away enough each month. My favorite budgeting app would allow that (I use You Need A Budget, some call in YNAB)
Thank you everyone… so what happened was, we had 1 partial payment left. The mortgage company said, do you want to use part of your escrow $$ to pay the last payment and you can own your house even sooner. So, hubby said yes, and walllaallllaaa we own our house almost 11 months sooner than they expected and a month sooner than our estimation. I still have to see what they charge us to close out the loan/deed, etc. But hurrayyyyyy!!
Since they have already paid the insurance for the next year, that is taken care of and we have some leeway to transfer the bills to us. They did NOT pay off our 2nd tax payment, but I started a savings account and automatic withdrawals to deposit the approx amount of insurance and tax $$.
Now, I can take the mortgage money and replace the roof and wiring … sigh, such a money pit!
@mikibell Congratulations! Yay! And so smart of you to do the automatic savings for your taxes and insurance! Practically painless. : )
@mikibell
Wonderful news!
And now the reality sets in that we never truly own our homes, even after paying off the mortgage.
Stop paying property taxes (not that you should do that!) and see what happens.
But it is great to have those mortgage payments out of the way.
We think of our “permanent rent payment” as the total annual property taxes + insurance, divided by 12.
@RedOak. I did it by 24, but yes… I agree we never truly own our homes…
@mikibell @RedOak By 24? If you’re saving a half month’s payment every two weeks you’re going to have an extra month’s payment by year’s end! That’s very smart. A little extra padding doesn’t hurt!
EDIT: Unless you are just getting paid twice a month, which in that case…GOOD MATH!
@mikibell I was putting it in terms of the monthly payment amount (based upon annual cost), just like a rent or mortgage payment.
Not the personal funding mechanism.
@therealjrn easy math, I get paid 2x a month, honey is on a 26 pay cycle. I miss those days
Added a small amount of padding because I have lived in this town almost all of my life and I know what they do to the mill rate and I used whole numbers rather than change.
P.S. my husband laughs at my spreadsheets … it is not nice!!
@mikibell @RedOak
Well, really, if you don’t have a mortgage there is generally no legal requirement to carry insurance on your house. That does make it distinct from taxes.
Most people probably should maintain home insurance, though. I’m not suggesting you drop it.
@Limewater @mikibell
Only a fool or someone wealthy enough to readily replace their home out of other assets would drop homeowners insurance.
Going without homeowners insurance carries minimal expected probability risk distinction vs. ignoring property taxes.
Our general insurance philosophy - if the covered item is critical and we can’t readily replace it out of other assets or income, we insure it. But we also generally go for the highest possible deductible to reduce premium cost.
@mikibell @RedOak
I think there might be a couple more edge cases where dropping home insurance might be reasonable. But these would be very narrow cases that don’t apply to the vast, overwhelming majority of homeowners.
But again, I am not arguing that anybody should drop his home insurance.
Like you, I carry the maximum possible deductible on my policy.
@Limewater @mikibell
For my info & education, I’m curious what those edge cases would be?
@mikibell @RedOak I used the words “I think” and “might” for a reason. I don’t want to let my lack of imagination lead me to conclusions.
Hard-and-fast rules often have weird exceptions that you just don’t think about until you are faced with them.
But sure, I’ll try to come up with one: Say you purchase a home where the value is all in the land. The house is technically livable, but is essentially a tear-down.
You might choose to live in it a little while to save up and make your building loan even smaller for whatever you plan to put on the land or during construction of your new place, but there’s not much point in insuring it. The insurance companies may even refuse to cover it.
@Limewater @mikibell
That wouldn’t be an exception. The house is virtually worthless or nearly so. It fits the above rule of not being of high enough value to insure relative to other assets. In fact, if it is a tear down, it might not be insurable if if you wished it so.
@mikibell @RedOak Fine. Maybe you are living in the house but don’t have ties to the geographic region and don’t really care if something happens to it because you can just move on.
It’s just a hypothetical. It’s an admission that I have not thought through the entire set of home ownership scenarios.
@Limewater @RedOak I haven’t carried insurance on my house for many years. IIRC, @RedOak and I had a discussion about this two or three years ago.
It wasn’t really a conscious decision I made one day “Hey, it’s a good idea to drop my insurance!” but rather a small series of events which concluded in my choice not to get get another policy. After I fired American Family due to what I considered to be dishonest and conniving settlement and claims practices. I shopped around a bit, I did some math and decided to do without for the time being.
Although the house fire across the street a few weeks ago set me to checking my calculations…
@Limewater @mikibell I promise, my curiosity is sincere. If other scenarios come to mind, please share. Always hoping to learn something new.
Here’s a personal example where we are perhaps not being insurance-smart…
We own vacation wooded acreage “up north” (the north half of our state is mostly rural). It has a pole barn and is completely off grid, not even having an address or Zillow entry.
While there isn’t any single thing in the pole barn of high value - we use it to store (hoard) surplus furniture, toys for (hopeful) future grandkids, various property management tools like an old beat up garden tractor, an old generator, and camping gear.
There are no “critical” assets, including the relatively inexpensive to replace pole barn.
So we do not carry insurance on that property.
However, my concern is not asset replacement, but rather liability coverage.
While we have an umbrella policy that fills in coverage holes for our declared home and cars, this vacation property is off grid, insurance-wise.
Since I have a lightly used LLC, we’ve considered shifting that property to it as well.
Must investigate…
BTW Tip: anybody with significant assets should investigate an umbrella policy. Even $1 million of coverage can be a bit over $100 per year.
@mikibell @RedOak Serious question relevant to my interests: How did you come into possession of this land?
I am kind of interested in buying undeveloped rural property, but I don’t really know how to go about finding it other than to look on Zillow, and you said your property wasn’t even listed.
@Limewater @mikibell
It was fortuitous. My parents consolidated my dad’s business to the location they had in that county as a means of reducing labor costs and because UPS had developed into a credible means of serving his customers. So they moved there.
He bought the property with the purpose of having a pole barn to store seasonal stuff, his toys, whether that be a boat or a Model T pickup.
We later realized the property had kind of turned into his “man cave”. He tinkered, paid grand kids (our kids) to make trails, etc… I think my mom realized early on.
Before he died, it was clear our family “appreciated” and enjoyed “up north” more than the other siblings. So we transferred the property from my mom’s trust to our family.
Short Version: my dad, having lived there for many years and serving as a part time County Commissioner, had pretty impressive network, including a friend-investor partner who is a Real Estate Broker.
@Limewater @mikibell If I wanted to reproduce our “luck” in finding this property - an amazing hardwood forested 7-acres located on a ridge overlooking a valley…
I’d vacation in the area of interest. Get to know the area and find that “good ol’ boy” Realtor who knows everybody in the county.
Your best ally is a local connection. When you talk to friends/relatives about vacation property they own, ask the pluses and minuses of their locations.
You’ll eventually learn where the attractive features are located, impacting property value and future possibilities.
In our case, this property is located about 7 miles inland from Lake Michigan. The price per acre goes up dramatically as you move toward the lake. This location is a nice compromise since we didn’t want something that was a financial burden. Annual property taxes less than $1,000 per year.
But Zillow and Google earth can still be a big help since most properties for sale or sold within the past 10 years should be on it. Save a Zillow search for each of the areas that interest you and you’ll get regular emails with listings.
Glad this thread was bumped.
I paid off my mortgage a few years ago and only this year noticed that the bank was still listed on my insurance.
After reading this thread, I feel like I need to take a look at the deed.
I have a terrible memory for details - the term “quit claim” rings a bell, but I don’t remember filing anything with any clerks.
re: Escrow - at one point, when I refinanced, I learned that it wasn’t required.
There was no rule stating that I couldn’t just pay the insurance and taxes myself, so I did.
To me, escrow was just needlessly complicating the issue.
My property tax is billed quarterly and I pay my insurance in full annually.
My monthly mortgage payments were higher than any of those payments, so affordability isn’t an issue.
@DennisG2014
If you’re putting less than 20% down on a house, lenders do generally require an escrow account and you have to put your payments for Private Mortgage Insurance (PMI) in it.
If you’re over that threshold, you usually don’t have to carry PMI and don’t have to have an escrow account.
@DennisG2014 @Limewater
Perhaps this has changed since the last time we re-financed. The less than 20% equity PMI requirement has been there nearly forever.
But when we refinanced, the broker required an interest rate bump to eliminate escrow for property taxes and insurance. And we had something like 50% equity at that point.
@DennisG2014 @RedOak I’ve never refinanced, but when we bought our first house our lender did not require it.
@DennisG2014 @Limewater @RedOak Many lenders want escrow accounts so they can be sure that insurance and taxes being paid. Not everyone has the financial discipline to keep it separate and paid up to date. As the financial owner, the last thing a lender would want is a pile of rubble should a disaster happen or for the property to go to auction and snatched out from underneath them because someone didn’t pay their taxes.
AFAIK, the lenders cannot force a buyer to have an escrow account, but the higher rate is an indirect way of making the buyer want one to be set up.
@DennisG2014 @Limewater @narfcake
BTW, I should have mentioned our credit score is virtually perfect and has been as long as we’ve known of its existence. So perhaps we chose a really risk averse finance source.
Perhaps finance sources holding the mortgage rather than selling it are more willing to make judgement calls about escrow requirements.
However, it stands to reason, when reselling a mortgage rather than holding it, one with an escrow requirement will fetch a higher price… as will one with a slightly higher interest rate to make up for the lack of escrow requirement.
I’m not “in the business”, so who knows…
@DennisG2014 @Limewater @RedOak I was somewhat in the business during the “housing boom” period; I was an “auditor” part time. Back then, there wasn’t a consistent pattern to escrow account requirements and rates, but the lenders that “insisted” on one tended to offer lower rates whereas ones that were explicit in it being optional usually weren’t the lowest.
The thing is my job wasn’t to actually to audit or validate any of the information but to merely check off whether the necessary documents were included or excluded in a loan package. Job verification consisted of one question: “Does [the borrower] work there?”. Any account verification was only for current balance and 60 day average. For a stated income loan, I had to make sure that none of the documents actually showed the borrower’s [real] income. For NINJA loans (No Income No Job or Assets), I had to make sure that none of the documents actually showed the borrower’s [real] income, job, or assets.
It was pretty fucking ridiculous, and I got out of it well before the crash.
@DennisG2014 @Limewater @narfcake
Our neighbor worked in that middle area, between the folks initiating mortgages and the market where they were re-sold.
Like you, she grew tired of the slimy practices - whether it be missing documentation or questionable documentation. She got completely out of the business.
@RedOak I recall one package in which a borrower’s response was written in crayon. At least that got rejected with the request that “all documents must be in black or blue ink only”.