As a first-time seller or if it’s been a while since you’ve sold a home, you may be wondering about your mortgage; when does it get paid off, who is responsible for sending the final payment to your lender. Don’t worry most homeowners that are selling property have a mortgage attached to that property. We’re here to let you know that paying off a mortgage doesn’t have to be as complicated as it sounds. Since it is part of the closing process, our Closers are used to handling this.
What is a mortgage?
The mortgage is a legal agreement that the owner of the property makes with a lender or another type of creditor that loans money at interest in exchange for taking the property as collateral. So essentially if you purchase a home and borrower the money to do so, you and the creditor own the property together until the creditor is paid in full and a release of lien is filed of record in the county that the property is in; otherwise it remains attached to the property. Unless the creditor you used to borrower the funds from services their own loans, there is a good chance that your loan was sold to another company. If your loan has been sold or transferred to another company don’t worry the process of paying it off isn’t any different.
What is the process?
First the seller must fill out an authorization to release form. This document is sent to your lender along with a request for the pay off balance. This form only asks for a small bit of information such as your loan number for your mortgage, your name, date of birth, social security number and the date that the payoff needs to be made through. In most cases this form can be signed electronically, however some lenders won’t process the request with an electronic signature. If that is the case the title company will have you come by and sign with an old fashion black or blue pen. Once the request has been submitted to your lender and processed they will send the payoff to the title company.
After the closing takes place and your payoff will be sent to the lender that has the lien on your property. Once the lender received the payment and has applied those funds to the debt, they will send the release of lien out. Most of the time the lienholder will send the release directly to the courthouse in the county that the property is in to be filed of record. Sometimes they will send it directly to the title company and the title company will file it of record in the appropriate county. Every now and then the lienholder will mail it to the person who had taken out the lien. If that is the case, you will need to take the release to the courthouse and file it of record. If there are any excess funds left over after the lien has been paid in full the lienholder will send those funds to you. They will also send any funds that are in your escrow account to you after the lien has been paid off. You might be thinking “If my closing is in the middle of the month on the home I am selling, do I still have to make my payment that is due at the end of the month?” No, if your transaction has closed and funded you no longer own the property. We would like to remind you that if your payments are set on auto-draft with that lender to contact them to stop the payments.
If you have any questions about paying your mortgage off at closing please don’t hesitate to reach out to our closing team at Red River Title. We are always happy to answer any questions you may have.