Q: I have a small condo I just paid off. I contacted my mortgage company requesting documentation. The only documents they provided were a letter stating the loan is paid in full and a certificate of satisfaction of the mortgage.
A: Here’s some good news: Your lender gave you just about everything you need. The lender told you that your loan is paid in full and gave you the documentation stating that the lien or trust deed on your property has been released.
If you received the lien release, don't forget to get the document recorded. The purpose of the lien release is to give notice to the world that the mortgage or trust deed against your property has been released and that the lender no longer has an interest in your property.
The title insurance policy you purchased when you bought the property continues to insure you against possible title problems that may affect your property. For example, if you purchased the property some time ago and there was a title issue affecting the land that is uncovered today, the title insurance policy would cover you for that loss up to the value of the policy. We're not going into the intricacies of title insurance in this response; suffice to say that you should keep the title insurance policy documentation for as long as you own the property, and even longer.
You should definitely keep the letter telling you that your loan was paid off in full. We’d also want you to keep at least the most current loan statement, the “payment in full” letter and a copy of the satisfaction of mortgage after it has been recorded. But we don’t see why you’d need to keep the other loan documents. The middle ground would be to scan to a cloud storage drive so you can keep them for your records.
The reason we'd like you to keep a copy of a loan statement is that lenders frequently show information on the statements that they don't put on the lien release letter. For example, it's good to have the loan number and the lender's toll-free numbers just in case you need to contact them in the future. It's also good to have some documentation as to what your loan balance was right before you paid off your loan.
Now, when you took out the loan, you had a loan closing statement by the settlement agent and a statement from the lender outlining all the closing costs; you might want to keep a copy of that for a while. You might need it when you fill out your income tax forms depending on any other costs you incurred when you obtained the loan. Sometimes, some of those costs are deductible. You'll need to talk to your tax preparer or accountant for more information on that issue.
Ideally, we’d like to see the lender mail you back your original promissory note you signed along with the original mortgage or trust deed. Both documents should be marked canceled. But we see fewer and fewer lenders sending those documents back to their borrowers. So, it’s good to keep the paperwork showing that the loan was paid off in full for at least seven years following the loan payoff.
Finally, don't forget to tell your insurance company that you paid off your loan so that they take the lender's name off your insurance policy.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (fourth edition). She is also chief executive of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.