Mortgage pay off questions

kashka_katJanuary 12, 2011

Thru some good fortune � I may have some family help in paying off a mortgage. Wow never in a million years dreamed that could happen.

Anyway � I was given pay off quote which is balance plus 2 mo. Interest plus small recording fee. Is there a way to time the payment so that my relative pays the least possible amounth of interest - why should it be 2 whole months? He is balking at that which I respect - he is a frugal guy after all!

Say my P&I payment for January is due and paid on January 1. So I�ve paid my principal plus the interest for the month previous (December). If my next payment isn't due until February 1, why should I have to pay two whole months interest when I pay off the loan? Wouldnt it just be 1 month?

Also my relative has suggested that its possible to negotiate down the principal due. I�ve never heard of that and the loan officer tells me that that is not done except in some foreclosure instances and as he said "you don�t want to be there."

Any ideas on where my relative might be coming from? He�s not the kind of person who would just make up stuff.

thanks in advance

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I wonder if he's talking about the amount you can pay down your mortgage every year - for me, it's 1/3 of the original principal. So if I did that, THEN went to pay the rest off, the penalty would be based on the interest that remained which would be less. At least, that's how I understand it.

    Bookmark   January 12, 2011 at 4:41PM
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I have loan that says no penalty for early payment so I don't know if that's it.

By the way - what exactly happens when or if it's totally paid off? What kind of documentation do I get or title or proof that I actually own the place?

I'm so ignorant! Never dreamed I'd have to know this!

    Bookmark   January 12, 2011 at 6:23PM
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I'm not sure if the process/document names are the same in all states, but at least in CA, the lender should file a reconveyance with the county recorder when the loan has been satisfied; it confirms the release of their interests. You, the borrower, should eventually get a recorded copy, just like you did with the recorded deed after your purchase of the property. You should request a copy from the lender and keep after them until you get it.

    Bookmark   January 12, 2011 at 11:26PM
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And since it is a recorded document here in California, you don't need the piece of paper to prove ownership.

    Bookmark   January 13, 2011 at 12:02AM
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A lot of times they set the payoff date a couple weeks or a month ahead to allow plenty of time for the payment to be made (especially in cases of resales). When this has happened to me (or my clients) in the past, we got a refund for the difference 4-6 weeks after the loan was paid off.

Why don't you tell your *VERY KIND* relative that you will pay that additional interest, since you might get it back later.

    Bookmark   January 13, 2011 at 11:26AM
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Barb, thank you, that makes sense - it seems they added on an extra month there---? Was my understanding of it correct.

And your suggestion that I pay the interest - perfect!

    Bookmark   January 13, 2011 at 4:07PM
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ingrid_vc so. CA zone 9

Pardon me if this seems off the subject or none of my business, but I can't help wondering why you would want to pay off your mortgage. If those same funds from your relative are available for you to invest, that seems like a more logical course to me. The money that you use to pay off the loan will just sit there and never make you a penny. In fact, should you decide or need to sell your home at a lower price than when you bought it you will be losing money. If you invest it that money will grow and keep on growing, at least in the long run, in spite of recessions as we've recently had. Those people who kept their heads and left their money in investment funds have recouped their losses and made a substantial profit since then. Just food for thought, and I wasn't sure whether you had considered this aspect of your situation.

    Bookmark   January 14, 2011 at 4:14PM
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kashka_kat, Is this mortgage adjustable, balloon or fixed?

You didn't say and that makes a big difference.

    Bookmark   January 14, 2011 at 7:20PM
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Kasha, you are very lucky to have such a kind relative. He may be thinking about foreclosures when he asked if the total could be reduced.

I agree with Barb that you should pay whatever costs your relative objects to paying. Be sure to ask him to send the payment registered mail or pay on line. We just paid off our mortgage in November and very quickly got a refund, so I think Barb is right; the banks add a little in case the payment does not go out immedidately.

After paying it off, we notified our home insurance company and the county (property taxes) so that the bills will now come to us instead of the mortgage company. We are still waiting for the final paperwork, but understand that six months is not unusual.

I suspect your relative would be insulted if you asked for cash to invest. Paying off your mortgage is a gift. I would not try to "negotiate" a gift!

Congratulations on your good fortune!

    Bookmark   January 15, 2011 at 3:19PM
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