Paying off Mortgage

[CSdot]

Had a good year financially, so about to pay off our only debt, the $170,000 balance on our mortgage. We live on the coast, so homeowners insurance, wind insurance, flood insurance and of course property taxes are all collected and paid through the bank’s escrow.

Has anyone here paid off their mortgage and started paying these items separately? With the exception of property taxes which are a requirement, did you keep the insurances in place or did you dropped any? Currently $795.40 per month, or $9,544.80 per year, of my payments go into the escrow. Presumably the bank will refund any remainder held in escrow after they receive the payoff, so I can use that to seed the account to pay these items.

Any experienced pointers on the mortgage payoff process?

Thanks.

 

[JDARNELL]

Yes. They will refund and you will just pay what you want to whichever company you use for that product.

 

[ExFlyBoy5]

Any experienced pointers on the mortgage payoff process?

Thanks.

Just a couple ideas I can think of:

I would make sure that you have gotten the signed/notarized release of mortgage in about 45-60 days. It *should* also be stamped by whatever office that handles the recording of mortgage documents for your government entities. These can often be found on line, as well. Some recorders will also annotate the original documents with language that reflects that it's been paid off/satisfied...but this isn't a universal rule.

I would also let your insurers know that the loan/mortgage has been paid off so they will remove the mortgage company as an additional loss payee. Last think you need to deal with if/when you have a claim is to have the check sent to the bank that is no longer servicing the loan or have it made payable to you AND the bank. That is a headache you wouldn't want to deal with during some event that requires a claim.

Other than that...CONGRATS! Being mortgage free is one of the best things ever. Well, in my opinion of course.

 

[MrsHaloFIRE]

I keep property (homeowners insurance) with no mortgage. I know I'm only one washing machine malfunction away from needing new floors any day.

 

[PaunchyPirate]

Good advice above. The only thing I would add is to time the payoff when taxes (and insurance) aren't currently or soon due. Try to time it so it is clear whether YOU or the escrow account should pay them. Once you've cancelled escrow, stay on top of the due payments just in case they don't automatically get sent to you. I would call both the taxing districts and insurance companies to ensure they are aware they need to direct bill you going forward.

Excess escrow funds will eventually be returned to you. Mine took just a couple weeks. I would keep any insurance you had before.

 

[rk911]

Had a good year financially, so about to pay off our only debt, the $170,000 balance on our mortgage. We live on the coast, so homeowners insurance, wind insurance, flood insurance and of course property taxes are all collected and paid through the bank’s escrow.

Has anyone here paid off their mortgage and started paying these items separately? With the exception of property taxes which are a requirement, did you keep the insurances in place or did you dropped any? Currently $795.40 per month, or $9,544.80 per year, of my payments go into the escrow. Presumably the bank will refund any remainder held in escrow after they receive the payoff, so I can use that to seed the account to pay these items.

Any experienced pointers on the mortgage payoff process?

Thanks.

when we had a mortgage we canceled the escrow account as soon as the bank allowed which with accellerated payments was fairly soon. that meant we had to budget for our semi-annual prop tax payments. we never had the mortgage insurance.

 

[Dash man]

It’s your call to keep the various insurance policies. Homeowners is a given, but flood and wind is for you to determine. I keep flood insurance on our primary home and our Jersey Shore home (two blocks from the beach). Only you know if you could absorb the hit if there was a flood.

I suggest you contact your taxing agencies to have them bill you directly. Set up accounts online so you can see the bills if they have that ability.
As was said above, notify your insurance company to remove the lien holder so you get any claim checks directly.

 

[HI Bill]

We live on the coast, so homeowners insurance, wind insurance, flood insurance and of course property taxes are all collected and paid through the bank’s escrow...did you keep the insurances in place or did you dropped any?

Is your house in a flood plain? Subject to coastal swells and/or landslides? Do you understand the geologic hazards associated with your house's location? Do you live in an area frequented by hurricanes? Without knowing the value of your house and assets, and whether you could easily afford to rebuild sans insurance, this one's hard to answer.

I live in Hawaii, and my mortgage lender requires hurricane insurance. There have only been two major hurricanes in Hawaii (Dot in 1959 and Iniki in 1992), and another minor one that hit Hawaii Island, and then broke up after hitting the 13,000 foot tall volcano. Would I go without the insurance? Probably not, as the cost of rebuilding on my own in the event of an unlikely catastrophe would definitely lower my future standard of living. Insurance only lowers it a little.

 

[geeky_grrl]

I only had homeowners insurance (not in a flood plain or hurricane zone). I kept it as much for the liability coverage as anything else. My insurance is pretty cheap (~$700/yr) so it isn't a major impact on my budget. I could probably raise my deductibles but haven't been motivated to call the agent.

 

[Dash man]

You may want to consider Umbrella coverage for $1M or more. It’s pretty cheap for higher liability coverage.

 

[CSdot]

yep, in a hurricane zone (Coastal SC), so I will keep the flood insurance. I will have to keep wind and hail insurance too, lest the flood insurance carrier will claim the wind blew the roof off and the rain caused the flooding.

If you just have wind and hail insurance, but no flood insurance, the wind and hail carrier will attribute all damage to flooding, even if the wind blew the roof off and the rain caused the flooding.

 

[Morgan22]

Just a story about insurance. Friend's mom paid off her house and decided she didn't need insurance anymore since it wasn't required. A few months later her house burnt down. Total loss. She couldn't afford to replace it, but at least was able to sell the lot for someone else to build on. She now lives in a mobile trailer.

Personally, I would never go without insurance myself. But if you feel you can afford to rebuild on your own, then maybe you can go without it yourself.

 

[jazz4cash]

Just a story about insurance. Friend's mom paid off her house and decided she didn't need insurance anymore since it wasn't required. A few months later her house burnt down. Total loss. She couldn't afford to replace it, but at least was able to sell the lot for someone else to build on. She now lives in a mobile trailer.



Personally, I would never go without insurance myself. But if you feel you can afford to rebuild on your own, then maybe you can go without it yourself.

I guess I am naive about some things but it never dawned on me that some folks would go without homeowners policy. With no mortgage I wonder if your friends mom was being frugal or just couldn’t pay. Now that I think about it I probably know many people that are 2nd or 3rd generation occupants of a family home and just getting by. Unlike the property taxes, the increases in cost of homeowners insurance are not capped and some of the old neighborhoods are in high demand.

 

[CSdot]

Was playing around on the Mortgage Payoff feature on the Wells Fargo online banking site, thinking I could just pay the $170,000 by transferring the $ from my bank account to the mortgage account, but the payoff instructions seems more formal and complicated.

When you want a payoff statement, you pick your payoff date, then you press a button on the screen that generates a formal payoff letter in an old-timey courier typeface (which you can print off with a payment voucher) with very specific instructions and disclaimers, including:

WELLS FARGO HOME MORTGAGE - PAYOFF TRANSMITTAL FORM
Please send the funds by wire. This is the fastest way to complete the
payoff. If a wire transfer is not an option, we prefer a cashier's
check or certified funds.

I learned that I am paying $14.60 of interest per day. And that's at 3.25%. I can only imagine what our parents had to pay in the 70s when their mortgage interest was 18% per annum!!!

 

[geeky_grrl]

I guess I am naive about some things but it never dawned on me that some folks would go without homeowners policy. With no mortgage I wonder if your friends mom was being frugal or just couldn’t pay. Now that I think about it I probably know many people that are 2nd or 3rd generation occupants of a family home and just getting by. Unlike the property taxes, the increases in cost of homeowners insurance are not capped and some of the old neighborhoods are in high demand.

I know my SO's dad doesn't have homeowners insurance. He has an old wood stove in his cabin he bought for cash and he can't get insurance without replacing it.

His cabin almost burnt down a few years back in a wildfire (an outbuilding 20 ft away did burn down). I guess my SO would probably have paid for a new cabin so dad would have a place to live. A lot of his neighbors lost uninsured properties in the fire and the land is just empty now since they don't have money to rebuild.

 

[Sgare]

Was playing around on the Mortgage Payoff feature on the Wells Fargo online banking site, thinking I could just pay the $170,000 by transferring the $ from my bank account to the mortgage account, but the payoff instructions seems more formal and complicated.

When you want a payoff statement, you pick your payoff date, then you press a button on the screen that generates a formal payoff letter in an old-timey courier typeface (which you can print off with a payment voucher) with very specific instructions and disclaimers, including:

WELLS FARGO HOME MORTGAGE - PAYOFF TRANSMITTAL FORM
Please send the funds by wire. This is the fastest way to complete the
payoff. If a wire transfer is not an option, we prefer a cashier's
check or certified funds.

I learned that I am paying $14.60 of interest per day. And that's at 3.25%. I can only imagine what our parents had to pay in the 70s when their mortgage interest was 18% per annum!!!

Sometimes I think that if I came across a large some of money (currently paying a monthly large principle payment) I would just pay a few very large payments to get it down so the system would just end as normal, showing me a small last payment. They probably suggest the wire transfer because people are needing it done fast for some timed reason. If you wanted to do it I would go on line and pay the largest principle amount I could that is a payment or two less than the balance.


As far as insurance, think of all the people who have paid their whole life and didn't use it.

 

[Dash man]

Sometimes I think that if I came across a large some of money (currently paying a monthly large principle payment) I would just pay a few very large payments to get it down so the system would just end as normal, showing me a small last payment. They probably suggest the wire transfer because people are needing it done fast for some timed reason. If you wanted to do it I would go on line and pay the largest principle amount I could that is a payment or two less than the balance.





As far as insurance, think of all the people who have paid their whole life and didn't use it.

They suggest a wire transfer because the payoff amount is only good for a few days. Interest accrued daily, so if a mailed payment is delayed, more interest accrues and there’s an existing balance still.

 

[njhowie]

Having paid off our mortgage years ago, and read about issues others have had, the most important piece of advice I can give is to make sure that your county tax collector updates their records to indicate that you are now responsible for payments, the payment notices/coupons are to go to you and not the mortgage servicer.

It is very common that with a mortgage payoff the tax collection records do not get properly reflected in a timely manner or at all, when the quarterly taxes are due you do not receive the notices, don't think anything about it, and next thing you know the account is delinquent, racking up penalty and interest and potentially worse can happen.

You are responsible for the tax payments immediately, regardless of whether the county records get updated in a timely fashion or at all. Be sure that you stay on top of them and that their computer system properly reflects it.

 

[Toocold]

We paid off multiple home mortgages. You will need to get a payoff quote from your mortgage holder, which will include your principle and interest but also other fees. They will provide additional instructions. You can wire that amount directly to them.

You will get notification from the bank that your mortgage is paid off, and they will return your escrow amount plus other adjustments. You will be responsible for notifying your insurance company that you will pay for it directly as well as the county for your property taxes.

 

[Surewhitey]

We have always kept insurance for the house. $860/yr for replacement coverage. We had to use it last year for a roof claim after the storm & it paid all of the $$ except $71... Enough to pay for the past 8-9 years of premiums.

We've had 2 claims in the past 20 years and they have basically made it a wash in the end, but peace of mind is worth it.

I remember the payoff a little anticlimactic, but it felt great. That was 15 years ago and we have never returned to the loan process. No more closing costs (loan fees) & better than average negotiating power imo.

We pay directly for taxes and insurance, but I really don't remember how that worked back in the good ole days...

 

[The Cosmic Avenger]

We kept our homeowner's insurance once we paid off our mortgage, and USAA is just billing us for it "bundled" with our auto insurance now, which is easy because that's also where we keep our checking account. I started a monthly transfer ($200) to a "property tax fund" savings account that was rounded up from 1/12th of our yearly taxes, and our county allows for no-fee eCheck (I think it's an EFT) payments, so I schedule those to be paid from the savings account as soon as the new tax bill comes out. If that account gets a significant balance, I have transferred money out, but only after the next year's bill is issued, in case it goes up and that surplus would help cover it.

 

[1242Vintage]

Congratulations. Paying off a mortgage is a big milestone.

Like many here we continued to carry homeowners insurance after going mortgage free. We live in the tinder dry west in a rural area and only takes a spark on a windy summer day to take out a whole community. Insurance gives a little bit of comfort when the sheriff is texting to be ready to evacuate as you watch the CalFire planes dropping retardant near by.

We also strategically pre-pay a portion of our property tax bill every other year so that every other year we have enough deductions to itemize our taxes. The other year we end up with the standard deduction. Have saved a few dollars doing it that way over the years.

 

[pb4uski]

.... As far as insurance, think of all the people who have paid their whole life and didn't use it.

 

[Sgare]

They suggest a wire transfer because the payoff amount is only good for a few days. Interest accrued daily, so if a mailed payment is delayed, more interest accrues and there’s an existing balance still.

Yes, which is why I think I would avoid all that and just send them in something shy of the balance, then at some point the last payment will be less than normal and the payoff.

 

[38Chevy454]

Yes, which is why I think I would avoid all that and just send them in something shy of the balance, then at some point the last payment will be less than normal and the payoff.

Then once you have the final payment down to a small amount likely less than one month's mortgage amount, just pay a little extra on top of the stated balance. The bank will send back any over amount once they process it as paid off. They will also send your escrow amount received back. You do not have to wire the amount, but it might be cleaner to do it that way since the bank is used to receiving payoffs that way, especially on real estate sales. Wire fee is usually $25-35 range, so it is not that much, it is secure, and the bank can handle it per their normal process.