I purchased a home in early 1997. I have since paid off my mortgage and have a question I hope you can answer.
I received a letter from my lender indicating my loan was paid in full effective May 9, 2012. I have never paid off a mortgage before, so I do not know what happens next. Should I expect any type of further documentation from the bank or the county to indicate the title or deed (I do not know the correct term) is in my name? Are there any proactive steps that I need to take with respect to the mortgage?
Congratulations on making your last mortgage payment. With nearly one quarter of Americans with a mortgage underwater on their loans, there are millions of homeowners who would love to be in your shoes.
Once your loan is paid off, make sure you receive the canceled documents back from the lender. Frequently, lenders will mail the canceled note and mortgage (or trust deed) back to the borrower. When you receive the canceled documents, place them in your house file and scan them into your computer so that you have an electronic record. Then you’ll know that the lender has truly ended its interest in your property.
More important than the canceled documents — even though they are quite important — is the document your lender must send to the office that records documents where you live evidencing that the mortgage lien on your property has been released. In the case of a deed in trust, the release from the lender releases the deed back to the homeowner.
Either of these two documents, when properly filed or recorded, will give notice to the world that your prior lender no longer has an interest in a loan on your property.
The next important matter to take care of is to call your homeowner’s insurance company and request that they remove your former lender’s name from the policy. At some point when you had the mortgage, your lender requested that it be added as an additional insured on your homeowner’s insurance policy.
Now that it is no longer your lender, it should not be listed on the policy. If you should have a claim and the lender is still on the policy, you might have to deal with the lender to get any money you are owed from the insurance company. You want to avoid that. So, make the call today.
Once you’ve taken care of those three items, you should be in pretty good shape. In some cases, the lender will send the release to you, and then you must then make sure that it gets filed or recorded with the proper government body.
Again, congratulations on paying off your loan.
Ilyce R. Glink’s latest book is “Buy, Close, Move In!” Samuel J. Tamkin is a Chicago-based real estate attorney. If you have questions, you can call Ilyce’s radio show toll-free (800-972-8255) any Sunday, from 11 a.m. to 1 p.m. Eastern time. Contact Ilyce and Sam through her Web site, www.thinkglink.com.