How does mortgage payoff work logistically?

Question

Let's say I am in a position to pay off a mortgage. I understand that there is a "payoff amount" that may not correspond to my balance due to various escrow and interest calculations. What I'm not clear on is how the process actually works in terms of sending in money and scheduling. Here are my sub-questions:

1. Does the process basically just involve sending in money or are there other documents that must be exchanged?
2. Is the payoff usually paid with a regular check or with a cashier's check, bank wire, etc.?
3. I see that a payoff amount is associated with a particular date, presumably because of interest calculations. Does this imply that checks are usually send by overnight delivery in order for them to arrive exactly on the designated date, and what happens if they arrive late?
4. Let's say my mortgage balance is $4500, and my monthly payment is usually $1000. What would happen if I just continued to pay monthly bills instead of requesting a final payoff? Would the mortgage company eventually send me a final bill that would work like a final payoff?

Answer 1

Start the process by contacting the company that services the mortgage. They can answer all your questions.

• Does the process basically just involve sending in money or are there other documents that must be exchanged?

They should have a form that needs to be submitted. You will want to get from them the most up-to-date payoff amount X days from now. The amount changes each day.

They will be sending you a document signifying that the debt has been met. They will also be filing paperwork with the county/city/township releasing the property from the mortgage obligation.

• Is the payoff usually paid with a regular check or with a cashier's check, bank wire, etc.?

Because all my mortgage payoffs have either been or refinancing or I have sold the property, the balance due was significant and the lender required a cashiers check. Contact them to ask. If it only a few thousand left they might take a regular check.

• I see that a payoff amount is associated with a particular date, presumably because of interest calculations. Does this imply that checks are usually send by overnight delivery in order for them to arrive exactly on the designated date, and what happens if they arrive late?

Sending the checks via overnight delivery speeds up the process, and cuts down on the uncertainty of the delivery date. Ask for a return receipt so that you have proof of the date it was received. Overpay by a couple of days. They will refund the overage.

• Let's say my mortgage balance is $4500, and my monthly payment is usually $1000. What would happen if I just continued to pay monthly bills instead of requesting a final payoff? Would the mortgage company eventually send me a final bill that would work like a final payoff?

If you let the mortgage run its course, you will still get a document back from them; they will still file the documents with the local government; and they will refund any overage. If you look at the coupon book, or the paperwork they gave you at settlement the last payment is usually a different amount due to rounding of the monthly payments.

Of course if you have been making extra payments or larger than required payments the numbers on the original coupon book are moot so contact the company for the last payment amount.

Answer 2

I went through the process so I'll add my experience for posterity. On the morning of the day I was ready to pay, I went to my mortgage company's web site and got an instant payoff statement dated for the same day. This had the final payoff amount as well as addresses to send checks and information about wiring. I printed this statement out and took it to my bank the same day and told them that I wanted to wire money. They referred to the printout and sent the money to the mortgage company. The next day, the mortgage company web site indicated that the loan was paid in full.

Although sending a check (and the payoff statement indicated that cashier's checks were "preferred"), wiring the money was an easy process and helped me to overcome my concerns about situations that might arise if mail had been used (i.e. I did not want to deal with the complexity of day-late/day-early fees/credits, and I did not want to worry about the complexity of potentially losing a cashier's check in the mail).