Logistics of paying off balloon mortgage, then selling house 1-2 months later

[RunningBum]

I have a balloon mortgage loan, comes due in May. I had originally thought I was clever and timed it to expire just after I planned to sell, but I mistimed and want to keep the house until at least mid-June, and of course it could be later until I get a buyer.

No problem on the money front, I've got liquid funds ready to go, earning slightly better than the 4.125% loan rate.

Is there going to be any delay or hassle with getting my title or whatever else I'll need to sell the house a month or two later? Would I be better off just going ahead and paying the balance off now to make sure the paperwork is done?

I got a letter from the mortgage company last year saying they'd be in touch with me as the due date got closer to discuss payment or refinance options, but Citi took over the loan through a merger late last year. I haven't heard anything from them except for the mortgage statement which does show it as a balloon. I'll get ahold of them soon, but don't know how accurate they'll be about telling me how quickly they'll get everything back to me.

Just wondering if anyone has experience in what happens after you pay off a mortgage and how quickly it goes.

 

[tightasadrum]

I recently paid off a balloon loan. It took several weeks to get the final papers showing the loans had been paid. You might be able to expedite the process if you need to. But I don't believe you should have a problem if you pay the balloon in May and put the house on the market in June. I mean realistically how many people are going to walk in the door with cash in hand wanting to close immediately?

 

[RunningBum]

I'm not going to put the house on the market in June. I'll probably put it on the market in early/mid April, and not agree to close before June. 60 days is a pretty standard time to close. If someone were to make an offer and say they needed it sooner, I'd have to decide whether it was good enough to move my stuff into storage and find a temporary place to stay. The chances of getting a buyer right away in April is small, but spring is a good time to sell so it could happen.

 

[Martha]

Most often closings on sales are done by title companies and they can confirm that the loan was paid off even if all the paperwork has not yet been processed by the time you sell. Shouldn't be a problem.

 

[Walt34]

In 2000 I paid off a house mortgage, and although at the time I wasn't planning to sell soon I did want to get the lien release and associated paperwork in hand. A few months before I paid it off the loan had been resold and the new lender was not well organized. If memory serves it took four or five months to get the paperwork in order, and that was only because I kept after them. A few years later when we did sell that house I was happy I'd had the foresight to not just procrastinate on getting the paperwork!

I later heard other horror stories of it taking up to a year to get the lien releases.

Therefore, I recommend that you don't put yourself in a position where someone else's incompetence can mess up your plans. If you can pay it off now, get the releases, and then when you want to sell you won't have that headache to deal with. Now you have the luxury of time. When settlement is looming you don't have that luxury.

 

[RunningBum]

I've been thinking about this and since it's been a nagging worry that something will go wrong with not having all of the paperwork by whenever I'm ready to close, I think I'm best off doing it now, as Walt suggests. There's not a lot of difference in the interest I'm earning on the money vs. the loan interest, it's a risk free move to eliminate the debt, and it'll save me some stress. I just put in a call to get a payoff statement.

 

[EngineeringMyFinances]

I paid off my mortgage early several years ago. It took them 3 months to file the release of lien, and I had to keep after them to get it done.

 

[RunningBum]

A follow-up on this.

It took me a few tries to get the pay-off information (using their "automated" system got me nothing), and then I dragged my feet a bit because I was thinking it would be best to do this at the end of the month (since that's what the pay-off statement was calculated on), so I didn't get the loan paid off until March 28. It appears that they would've credited back the interest paid on whatever date I actually paid it.

I got my house under contract in late April, with closing scheduled for May 28 (earlier than I had planned), and the escrow officer told me that the loan release had to be filed, or there was no way to close. A faxed copy of the letter wasn't enough. The release had to be filed.

To make a long story short, we were told at least 4 different dates by CitiMortgage that the release had or would be mailed, and whether it was/would be mailed overnight or via regular mail. The weekly call to get status and beg for getting it on the fast track was very frustrating.

It was complicated by the fact that the closing agent somehow missed that the document was actually filed on May 16, so the last and most frustrating call yesterday should have been avoided. I called the county clerk myself and she showed me where to look online, and that it had already been filed.

So it took about a month and a half to get the release of lien filed, and I was probably lucky at that. Don't cut this close if you're in my position, and even if you don't plan to sell right away, make sure that release of lien has been filed so you don't have to deal with this later.

 

[RunningBum]

Sold!!

 

[Bestwifeever]

Yay! See, that was easy, wasn't it ?