As you move through your debt payoff journey, there’s no doubt you’ve heard about the joys of a paid-off house. What is the best timeline? What is the best paydown strategy? There is a lot of discussion about most parts of paying off a mortgage, but one crucial piece is often left out: your mortgage payoff statement.
Let’s explore what a mortgage payoff statement is and why it's crucial to your mortgage freedom journey.
What is A Mortgage Payoff Statement?
A mortgage payoff statement is not actually that different from what it sounds like. It is a document that specifies exactly how much money is required to satisfy your loan.
However, don’t confuse this with your monthly statements. Those are important as well, but a mortgage payoff statement offers a clearer picture of the true cost of paying off your loan. It includes the loan amount, interest, and any other fees that you are on the hook for until your payoff date.
Your bank or lender issues a mortgage payoff statement based on a certain date. These “good through” dates are when you expect to pay off the loan. If you exceed the date, your statement has to be recalculated because you likely owe more interest and possibly more fees. (Definitely a pain!)
To get a mortgage payoff statement, you can generally request it using your online loan payment platform. However, some lenders may require you to call or come in to process this paperwork.
Also, lenders will prepare the statement based on the date you provide. This is not something that is generated automatically. Instead, most regulations require lenders to provide the paperwork within 7 business days.
Why Do I Need a Mortgage Payoff Statement?
Perhaps you’ve been paying down your mortgage for a while and you're ready to completely pay it off. Requesting a mortgage payoff statement is the first step in the process.
By doing this, you'll learn exactly how much principal you owe as well as the interest and fees associated with the final mortgage payoff.
The mortgage payoff statement allows you to:
- See the Whole Picture: A payoff statement puts the loan amount, interest, and fees all in one place on one page.
- Get Motivated About Your Mortgage-Free Life: There’s something really powerful about seeing the projections and a zero-balance date all in one neat and clear document.
- Keep More of Your Money: Taking out a mortgage is overwhelming. You go through what feels like an entire ream of paper and everyone talks a mile a minute. Things can get overlooked. That’s why it’s really important for you to get crystal clear on exactly what fees you are being charged.
Does it Cost Money to Get a Mortgage Payoff Statement?
Paying off your mortgage either on time or early can sometimes have additional fees attached to it. Those fees should be reflected in your payoff statement. But it never hurts to double-check the terms of your loan or even ask the lender.
As pictured above, I was charged a $30 statement fee and a $14 recording fee when I received my mortgage payoff statement. There were a bunch of other line items left at $0 including Prepayment Penalty and Release Fee.
Now, I wasn't charged, but that doesn't mean you won't be. Double check with your lender and see what you should expect.
After I Have My Mortgage Payoff Statement, How Do I Pay Off My Mortgage?
You have your statement and you’re ready to pay off your mortgage. So you sit down in front of your computer or pull up your banking app on your phone and submit a payment, right? Not so fast.
The mortgage payoff process isn’t quite so streamlined. In fact, there is a very good chance that you will have to go into a physical bank branch to pay off your loan. Granted, every lender and loan company is different, so you will want to be in touch with yours to get the specifics.
Whether you have to go into your bank or not, you will have to pay off your balance with certified funds. That might mean sending over a wire transfer from a bank. You also have the option of using a certified check. Just make sure that the check is made out exactly how the mortgage payoff statement specifies.
If you escrow your insurance and taxes and there is money left in the escrow account, you can expect that money to be returned to you. It’s also a good idea to turn off any automatic payments toward your mortgage that you have set up once the loan is paid in full.
For more details on how to make your mortgage payoff official, check out the steps that I went through!
What To Do With Your Money After the Mortgage is Paid Off
Once your mortgage is paid off, you might be wondering what to do with your money. Great question! Depending on the size of your mortgage and the size of any additional payments you were making (if you were making them!), you likely freed up hundreds upon hundreds or thousands upon thousands of dollars.
So let’s talk about what you can do with your money now that you have all that extra wiggle room in your budget.
Don’t Forget About Housing Expenses
While it would be wonderful if being mortgage free also freed you from property taxes and other homeownership expenses, it certainly does not. If you had everything grouped together in your budget, make sure you tease it apart before deleting that line. Otherwise, you could have a most unpleasant surprise come tax time!
Many homeowners also choose to contribute a bit of money to a housing sinking fund each month to cover any expenses that crop up from time to time.
Everyone’s financial journey is different, so it’s possible that you may have scaled back your retirement savings and other investments to pay off your mortgage early. In that instance, you want to prioritize your retirement and bump up your savings.
Challenge yourself to increase your 401k or 403b contributions until it’s maxed out. Consider opening a Roth IRA and fully funding that each year. No matter how you do it, saving for retirement is crucial. It’s one of the only life events that doesn’t come with a loan option in case you fall short with money!
Focus on Other Goals
Are you entirely debt-free now? If so, you might be ready to move on to other goals like setting money aside for your kid’s college fund or tinkering around with the math to see how close you are to becoming Coast FIRE.
Of course, it’s certainly possible that you still have other debt. In that case, prioritizing your highest interest debt and getting that paid off as soon as possible is a great area of focus.
Splurge a Bit
Paying off a mortgage is a huge accomplishment. Allow yourself and your family to indulge a bit. That’s not to say that you’ll splurge month after month indefinitely.
But many couples or families choose to do something special to mark the mortgage payoff occasion. Maybe it’s a fancy meal or a staycation or a vacation. Using some of the money that would normally go towards your mortgage payment to celebrate can certainly help build excitement around meeting other money milestones.
Here's what life after the mortgage was paid off looked like for our family.
When you find yourself with extra money in your budget, you might consider challenging yourself to give more. It’s certainly something that changed my outlook on money. Giving is also a powerful way to support your community and cultivate an abundance mindset.
Closing Thoughts on Your Mortgage Payoff Statement
Your mortgage payoff statement plays an important role in your mortgage payoff journey. This document from your lender details the amount of money that it takes to clear your loan based on a certain timeline.
It captures the loan balance, interest, and any fees associated with your account. By requesting a mortgage payoff statement, you can get a clearer picture of your mortgage freedom journey and how it can become a reality for you.
How is your mortgage payoff journey going? Have you requested a mortgage payoff statement yet?
Please let us know in the comments below.
Why was I required to pay an additional $3000 after closing on a mortgage payoff with cash-out.
The closing date was 12/28/2022.
Cash out received 01/03/2023
The final payoff to mortgagor was due on 01/04/2023 but were sent via Fedex on 01/05/2023
The old mortgagor paid the insurance on 01/03/2023 and collected the January mortgage payment on 01/06/2023.
What would be the outcome had the new mortgagor sent the payoff funds on 01/03/2023?