Buying a home represents ownership of one’s own residence for most people, and it goes beyond simply making an investment in real estate. Acquiring a home is a substantial financial commitment that typically necessitates obtaining financing via a home loan procedure that includes a mortgage or a deed of trust. The process of obtaining and securing a home loan requires handling multiple legal documents. Following the repayment of a mortgage, there are a few more procedures to follow and paperwork to obtain that proves homeownership.
Congratulations! You’ve finally paid off your mortgage. That’s a huge accomplishment, and it means you’re now the full owner of your home. But what happens to your deed after you pay off your mortgage?
The Short Answer:
You should receive a document called a “deed of reconveyance” from your lender within 30-60 days of paying off your mortgage. This document removes the lender’s lien from your property and proves that you now have full ownership.
The Long Answer:
Your property becomes subject to a lien from your lender when you take out a mortgage. This implies that until the loan is fully repaid, the lender will have a legal claim to your house. Until the loan is repaid, the lender holds the deed to your property.
Once you’ve paid off your mortgage, the lender is no longer entitled to a claim on your property. The deed of reconveyance is a legal document that transfers the ownership of your property back to you, free and clear of any liens.
Why is the Deed of Reconveyance Important?
The deed of reconveyance is an important document for several reasons:
- It proves that you are the legal owner of your home. This is important if you ever want to sell your home, refinance your mortgage, or take out a home equity loan.
- It protects you from foreclosure. If you don’t receive a deed of reconveyance, your lender could still foreclose on your home, even if you’ve paid off your mortgage.
- It gives you peace of mind. Knowing that you are the legal owner of your home, free and clear of any liens, can give you peace of mind.
What if I Don’t Receive a Deed of Reconveyance?
After paying off your mortgage, if you do not receive a deed of reconveyance in 30 to 60 days, do not become alarmed. Contact your lender and ask about the status of the document. They may have simply forgotten to send it to you.
If your lender is unresponsive or refuses to send you the deed of reconveyance, you may need to take legal action. You can hire a lawyer to help you get the document.
Additional Tips:
- Keep a copy of your mortgage payoff statement in a safe place. This will serve as proof that you have paid off your mortgage.
- If you are selling your home, make sure that the deed of reconveyance is recorded with the county recorder before the closing date.
- If you have any questions about the deed of reconveyance, contact your lender or a real estate attorney.
Paying off your mortgage is a big accomplishment. Make sure you receive the deed of reconveyance from your lender so that you can enjoy your homeownership journey with peace of mind.
What Happens When a Home Loan Is Paid Off?
After receiving the final payment on a home loan, the lender typically sends a statement to the borrower reflecting the loans status as paid along with the canceled promissory note. In some states, the lender directly sends a certificate to the local government, explains Zacks. In other states, the borrower must submit a canceled promissory note to the local government with a certificate of satisfaction. Specific documents depend on the state, but one way or another, the local government must be made aware that the loan has been fully repaid. This may require the services of a lawyer or a notary.
The lien on a home must be removed from the title after the loan has been paid in full. To discharge the mortgage note or deed of trust and remove the lien, notice must be given to the same office of land records or county clerk. Each municipality has specific requirements on how to get these documents released. The lender must indicate to the local government that the loan has been paid in full. Depending on the state, this is usually accomplished by filing a certificate of satisfaction or deed of reconveyance.
The property is the borrower’s after the last procedures of clearing the title and discharging the mortgage note or deed, and they should retain all the ownership documents they obtained when the loan was paid off. They serve as proof of homeownership.
How Does a Home Loan Work?
The loan process for a house can be a lengthy and complex undertaking. In essence, a lender uses the property as collateral to grant a loan to a qualified borrower, which is then repaid with interest. Promissory notes and mortgage notes, sometimes known as deeds of trust, are the two essential documents to sign when closing on a house loan. The mortgage note, also known as the deed of trust, describes what happens if the borrower defaults on the loan, while the promissory note specifies the terms for loan repayment.
At closing, the promissory note remains with the lender, and the mortgage note is filed with the local office of land records or county clerk. In many states, a deed of trust is used instead of a mortgage note and must remain with a trustee. A mortgage note and deed of trust are similar legal documents, with the notable exception that a deed of trust allows for non-judicial foreclosure if a borrower defaults, according to LawDepot. Once the mortgage note is filed with the local government, it is recorded on the property title as a lien.
What happens when you make your last mortgage payment?
FAQ
When I pay off my mortgage should I receive a deed?
What paperwork do you get when you pay off your mortgage?
What happens once your mortgage is paid off?
Is a release of mortgage the same as a deed?
What happens if you pay off a mortgage?
Congratulations! Paying off a mortgage is an impressive milestone. Now that you have paid off all the debt on your property, your home state’s law will direct your lender to take certain actions. The lender will send you a certificate of satisfaction.
What is a deed if I Stop Paying my Mortgage?
A deed is an official document showing that your lender has a right to your home if you stop paying the mortgage. This is another document your servicer may or may not send you when you pay off your home. It’s also possible your servicer will send it only to the government office of records where your deed was originally recorded.
Do you need a deed of reconveyance after a mortgage is paid off?
In the U.S., close to half of all states are title theory states that require a lender to issue a deed of reconveyance after a mortgage is paid off. If you live in one of these areas, it’s important that you understand how a deed of reconveyance works.
What happens when you take out a loan?
A: Let’s start by saying that when you take out a loan, you generally give a lender a mortgage or deed of trust. A mortgage creates a lien on your property that gives the lender the right to foreclose and sell the home to satisfy the debt.