Check your mortgage company rules before trying to pay off your loan
Here’s a quick tip I learned the hard way. As some of you know, we did a dumb thing a little over 6 years ago and both financed 100% of our home purchase and also opted for a 5/1 interest-only loan (for the first 80%), all while we could barely afford the house we were buying on our salaries.
Well, it’s 6 years later, and we have excellent news. We’ve paid off about $1500 of our first mortgage! No wait, that’s not the good news. The good news is that we’ve been fortunate enough to have, and keep getting, good, well-paying jobs as well as get a decent amount of side-income from some websites such as this one.
With that income, as well as tightening our belts and cutting expenses, we’ve been able to pay off over $110,000 in consumer debt and student loans. As of November 2009, we’ve been debt-free except for our mortgages…but that’s going to change soon, sort of. In addition to paying off all that debt, we’ve been focusing on paying off our second mortgage, which was almost $80,000 (we live in D.C.), which is a high-interest loan and stood between us and 20% equity in our home.
Well, we were supposed to have paid off the second mortgage right about now. I sent in the final payment of about $5k well in advance of month-end, and then kept checking the lender’s website to see the magic $0. But day after day came and it kept showing the same amount. Then I noticed that the first mortgage payment got credited, so I called the lender.
Know how to pay off your mortgage properly!
What I found out, although I don’t know how I was supposed to know this as I thought every payment was handled the same, was that the mortgage company requires a certified check and a payoff letter for the final payment. They bounced back my check, and I had to quickly send a check for the regular payment just to make a payment within the grace period. So now I have to wait for their payoff paperwork to come, go to the bank to get a certified check and then mail them in.
My biggest disappointment was that I got my wife so pumped up that we only had one loan left (which will probably never get paid off), and then have to let her down that I screwed up and didn’t follow the rules. Well, shame on me for assuming this was like any other payment. What happens if I sent just enough to have 1 cent left on the loan? Would they require a certified check then?
So, while I was hoping to surprise you all with the news that we paid off another $80,000 in debt in just 6 years (along with the other $110,000), I have to wait another month or so. But at least I was able to inform you enough to call your own mortgage company to find out their rules on loan payoffs.
Finally, some of you may be coming to this posting looking to fund your next home. If you are interested in refinancing or want to take out a mortgage, consider applying at USAA. They have an excellent customer service record and offer products that won’t rip you off. Click here to get started.
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