Reaching the end of your mortgage journey is an exciting milestone. As you approach the final payments, it's essential to understand what happens to the title and the role of the lender in this process. In this article, we'll explore what occurs with the title of your property and the actions taken by the lender when you're close to paying off your mortgage.
The Title and Mortgage
When you initially purchase a home with a mortgage, the lender typically places a lien on the property. This lien serves as security for the loan and ensures that the lender has a legal claim to the property until you are done paying off your mortgage. The lender's interest is recorded in public records, and it is known as the mortgage or deed of trust.
Releasing the Mortgage
As you approach the final payments on your mortgage, it's crucial to understand the process of releasing the mortgage lien. Once you have made the last payment, the lender will initiate the necessary steps to release the lien and clear the title of the property.
Confirmation of Payment: The first step involves the lender confirming that you have indeed made the final payment. They will review your account, ensuring that all outstanding balances, including interest and fees, have been fully settled.
Satisfaction of Mortgage: Once the lender has confirmed payment, they will prepare a satisfaction of mortgage document. This document serves as evidence that the mortgage has been paid in full. It includes details such as your name, property address, and the loan amount.
Filing with the County: The satisfaction of mortgage document is then filed with the county clerk or recorder's office where the property is located. This filing officially removes the mortgage lien from the public record, releasing the lender's claim on the property.
Title Search: After the satisfaction of mortgage is filed, a title search is typically conducted to ensure that there are no other outstanding liens or encumbrances on the property. This step is essential to confirm that the title is clear and free from any legal claims.
Title Insurance: In most cases, the lender will require you to maintain title insurance throughout the mortgage term. Once the mortgage is paid off, you may choose to continue with an owner's title insurance policy to protect yourself from any potential future title disputes.
Receipt of Documents: Finally, the lender will provide you with the necessary documentation, such as the satisfaction of mortgage and any other relevant paperwork, to confirm that the mortgage has been fully satisfied. It's important to keep these documents in a safe place for future reference.
Ownership and Next Steps
When you are finished paying off your mortgage, you become the sole owner of the property! The title is now solely in your name, indicating your complete ownership rights without any encumbrances. It's a momentous occasion that grants you the freedom and security of owning your home outright.