What Is the Procedure for Paying My Home Mortgage Off Early?

If you have the ability to pay your mortgage off early, you can save yourself thousands of dollars in interest. Paying off your mortgage prior to maturity involves more than simply writing a check. You must contact your lender for the exact payoff amount including interest and fees. Once you have that figure, you can move forward with your payoff.

Request a Payoff Figure

Submit a written request to your lender for a payoff figure. Indicate your name, the account number, the date you want to pay off the loan and where to send the funds. Allow a minimum of 48 hours to receive a response. Be aware that some banks charge a fee for a payoff letter. You can’t just pay the principal balance because interest accrues daily. The payoff figure will consist of the principal balance, all interest due through the date of payoff, cancellation fee and any miscellaneous charges such as late fees, cancellation fees or administration fees.

Compile the Funds

Make arrangements to compile the money necessary to pay off the loan. If you have the money on hand, make sure it is in readily accessible funds. If you are refinancing with another lender, make sure you are approved and ready to close on the payoff date. In refinance situations, you should have an approval before requesting a payoff.

Submit the Payment

Submit the payment to the lender on the agreed upon payoff date. The funds can be submitted by cash, check or by wire transfer. For large payoffs, the bank will likely require a certified or bank check. If you are refinancing, the new lender will submit the payment directly. Payoff letters contain a figure known as a per diem. This is the interest that will accrue each day after the payoff date. If you do not pay the loan off exactly on the payoff date, add the per diem for each day past the original date. If a long time passes or if you make a principal reduction, you will need to request a new payoff.

Cancel the Mortgage

Once the loan is paid off, your mortgage will need to be cancelled of record. The lender will sign off on the mortgage to endorse it for cancellation. They will then send it to the county clerk to remove the lien. The clerk charges a fee for cancellation, which is why the lender will add the fee to your payoff. Some lenders will allow you to forego this fee if you take the mortgage to the clerk yourself. They will endorse the mortgage for cancellation and give it to you to get cancelled. It then becomes your responsibility to get the lien cancelled.