When purchasing a home, you sign many documents at closing. Depending on the laws of the state where the property is located, you will sign either a mortgage or a deed of trust at closing. While each is different, the purpose is the same -- both secure your home’s loan and give your lender title to your property until the mortgage is fully paid.
Mortgages and deeds of trust both grant the title for your property to your lender until the loan is paid. A mortgage is an agreement made between you and the lender. A mortgage grants ownership of your home to the lender which will transfer the title back to you after the loan is paid. A deed of trust conveys the title to a third-party trustee acting on behalf of the mortgage company which will then place a mortgage lien against your home. Both deeds of trust and mortgages secure home loans until the loans are satisfied. With both mortgages and deeds of trust, the lender or trustee will release the title upon repayment of the loan.
Release of Title
After it receives your final mortgage payment, your mortgage company will release its interest in your home. To accomplish this, the financial institution will prepare legal documents to release your home’s title. Depending on your lender, the bank may file this document on your behalf with your county recorder. It may also send the lien release documents to you directly, allowing you to file the release with your local recorder.
Updating the Deed
Until the lien release for your property is recorded and filed, the bank has an interest in the ownership of your property. To minimize confusion with your property ownership, be sure that the lien release is recorded promptly. You should contact your county recorder’s office to make sure that the lien release has been recorded appropriately.
Once your mortgage has been paid and the lien release has been filed, two additional areas must be addressed. First, if you have been paying your property taxes through an escrow account, you should notify your local taxing authority so it can send your property tax bill to you. This will prevent delays in receiving your tax bill. Next, you should contact your property insurance company to remove your former lender as a lienholder on the policy. In the event of an insurance claim, this could cause a payment to be sent to your former lender in error.
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