Just to be clear, I want to address this part:
The balance is $ 173,000.00 I understand that most of my monthly payments go towards interest. But what should my actual payoff amount be? I have an interest rate of 3.5%
Your monthly payments primarily go to interest (if you have a 30 year loan, and are earlyish in paying it) because your payments consist of:
- The accrued interest from (day of last payment) to (today's payment)
- The amount of principal needed to pay the loan off in 30 years, while having constant monthly payment amounts
(1) is an amount that varies over the course of the mortgage, because the amount of interest decreases as the principal decreases. A simple calculation can show an approximate amount of this - for example, if you owe $173,000 at a rate of 3.5% (annually), then for a 30 day month, you would owe ($173,000 * (0.035*(30/365)) in interest, or just about $500 in interest (plus a small amount more as you owe interest on the interest, but it's meaningless here). So you have around $500 in interest due each month right now, plus whatever principal you owe - say $300 in principal, if you have an $800 payment (before escrow, insurance, etc.)
If you have a "no prepayment penalty" mortgage, as many do nowadays in the US, then you won't owe extra for prepaying: what you'll owe is the full amount of the principal ($173,000) plus whatever interest you still owe for the current month (maybe $500) and any escrow payment. You don't automatically owe the full interest for the entire mortgage (another $300,000 give or take) that you'd owe if you paid the minimum mortgage payment each month.
Now: a few details.
As others stated, the correct thing to do is to call your mortgage provider and ask for a payoff amount, and a date with that payoff amount. That will consist of:
(A) A dollar amount that's a bit over your current principal amount (if it's more than a bit over that, you may need to talk to a financial expert to see what's going on)
(B) A date which that is valid for. Typically a few days from now.
If you pay the amount in (A) by the date of (B), you will be paid in full and owe no more on your mortgage. Though you should of course verify this afterwards (sometime between the date of your payment and the date of your next payment's due date). You should receive an official payoff letter from your mortgage lender; ask for one if you do not, though it may take a month or three (ask them how long).
Once you've paid it off and verified the zero balance (actual zero, not $0.05, as that's still implying an amount due), you have several things to check:
- Assuming you had an escrow for property taxes, home insurance, etc., you now have to decide whether to continue having an escrow or not for those things, or just pay them yourself. I strongly encourage you to either continue an escrow, or manage your own escrow through a funded account that earns enough to pay property taxes each year. Talk to a financial planner about your options there. It's very easy to forget to pay property taxes, or to forget to budget for them, and guess what - if you forget and get behind, you'll lose the property you just paid off.
- Depending on the state you're in, you may have additional things to do to make sure the title is clear of the lender. Make sure that the title is released to you. Again, talking to a local financial planner or real estate attorney may be helpful.
Finally, again echoing what others have said: before you do this, make sure you're otherwise good financially. You owe taxes on the winnings, probably, so make sure those are paid for. And make sure you're entirely comfortable with paying the amount you're paying for your mortgage. 3.5% isn't a bad rate, and it may be simpler to not pay it off, and instead invest the amount and pay the mortgage from the investments. This isn't for everyone, but one thing it does for you is increase your liquidity while not "changing" too much from before, which can be a significant benefit to some.