Can my mortgage company do this?

[Pegasus]

Our mortgage has been sold to different companies several times during its term (a rant for another day). We have the monthly payments set up to automatically bank draft (pulled by the mortgage company, not pushed by the bank). Sometimes the payment amount varies slightly as the mortgage company adjusts the amount going into the escrow account for property taxes and insurance.  This works well for us as it doesn't incur any extra fees and is high-convenience/low-effort.

 

We are now within a few months of payoff.  The mortgage company has sent us a couple rather confusing letters so DH called to find out what was going on.  Essentially, they are requiring the final payoff payment to be sent by wire or by cashier's check with overnight delivery.  Either of these would incur additional costs and inconvenience on our end, including taking time off work during banking hours.

 

Can I insist that the final payment be by auto bank draft?  From the letters that they send, they are very particular that the final payment be to the penny of what is owed on the day it is paid and that only they can make that calculation. Why not just pull the final payment amount automatically themselves then?!

 

Any experience/knowledge within the hive to share?

 

Thanks!

 

 

[SparklyUnicorn]

I don't know, but damn that's stupid.  Is it even all that much money?

 

 

[Melissa B]

This was true for my previous car final payment. The auto draft takes an extra day to process and then the amount is no longer to the penny. I've never paid off a house before selling. :) But I would image the issue is the same. I made the final payment in person in order to collect the final paperwork.

 

[JoJosMom]

I had to do that when I paid off my house.

[StephanieZ]

Well, you can probably do whatever you want, but it's probably more hassle to NOT do what they're asking than it would be to DO what they are asking, lol.

 

I've paid off lots of loans over the years (but never a mortgage at the end of it's duration, always mid-stream with a sale or refi), and it's standard to have to call to get the "pay off" amount. That amount would only be good for a few days, under a week in general. Thus the need to expedite payment via wire/whatever. Seems silly at the end of the loan, when your accrued interest is pennies a day or less, so you'd think they could just "eat" the lost or gained few cents per day, but lenders are stupid, and laws can be stupider, so there you go. 

 

If I were you, I'd be doing a HAPPY DANCE for paying off the mortgage, and I would be happy to jump through the extra hoops for pay off, as I'd be SO HAPPY!!!

Whether or not this is your contractual obligation is probably clear in your loan docs and you'd have to dig them out (the original ones) and have a lawyer help you understand them. 

 

That'd be a lot more work than calling for payoff and just getting it wired. It's easy. Your bank will charge you $25 or so, IME. You can go ahead and do the payoff right now or anytime at your convenience, you don't have to wait for the week it's due. 

 

I'm so happy for you!!

[SparklyUnicorn]

Ok I've never paid off a house, but I do recall getting a check for a few cents with paying off a car.  They just took the last payment as usual and then gave me back the difference. 

 

 

[SparklyUnicorn]

Which ok this comes down to....they are making you pay extra so they don't have to.  I suppose to be done with them I'd just do what they asked.  I don't think a bank check costs too much.  The wire transfer will likely cost more.

 

 

[StephanieZ]

Ok I've never paid off a house, but I do recall getting a check for a few cents with paying off a car.  They just took the last payment as usual and then gave me back the difference. 

 

I bet that's what'd happen if you just send an over-payment. 

 

How about sending a "regular" payment a month ahead of the payoff date, that is equal to double a regular payment (or whatever the last two scheduled payments would be)? That'd presumably be a bit over your ultimate payoff amount since less time to accrue interest. 

 

They'll process it and send you a tiny refund, probably. It'd save you the wire fee.

[Annie G]

I’d rather they rounded up to the next dollar- that would be cheaper than the overnight delivery charge. Yeah, I know their accounting has to be to the penny, but it’s annoying. Why they can’t electronically refund any overage is beyond me. Again....regulations....I get it, but geez!

[SparklyUnicorn]

I bet that's what'd happen if you just send an over-payment. 

 

How about sending a "regular" payment a month ahead of the payoff date, that is equal to double a regular payment (or whatever the last two scheduled payments would be)? That'd presumably be a bit over your ultimate payoff amount since less time to accrue interest. 

 

They'll process it and send you a tiny refund, probably. It'd save you the wire fee.

 

That's a good idea.  Pay more ahead and make them send you the difference. 

[Zebra]

That's standard procedure for mortgage payoffs.

 

This is probably about guaranteed funds.   With an automatic transfer, a person has 60 days to go back and tell the bank that they did not want that transfer to happen.  With a cashier's check, the funds are guaranteed, no one can go back and try to reverse it.   The company holding your mortgage might be willing to risk it with a monthly payment, but not with a mortgage payoff where they are going to hand a title over to you.

 

You could also do a wire transfer, but there's probably a $30 fee with that.   But, you can probably call your bank and arrange it over the phone with them.   I would call the place that you are sending the money from, and ask them what they suggest.

 

I know it's a pain, but hopefully it's a one time thing for you.

 

 

 

[SparklyUnicorn]

That's standard procedure for mortgage payoffs.

 

This is probably about guaranteed funds.   With an automatic transfer, a person has 60 days to go back and tell the bank that they did not want that transfer to happen.  With a cashier's check, the funds are guaranteed, no one can go back and try to reverse it.   The company holding your mortgage might be willing to risk it with a monthly payment, but not with a mortgage payoff where they are going to hand a title over to you.

 

You could also do a wire transfer, but there's probably a $30 fee with that.   But, you can probably call your bank and arrange it over the phone with them.   I would call the place that you are sending the money from, and ask them what they suggest.

 

I know it's a pain, but hopefully it's a one time thing for you.

 

I have never heard that about an automatic transfer.  That one can take it back. 

 

I paid money to a charity using a debit card (which isn't that the same as an automatic transfer?) and due to a computer glitch the charity's website added on some zeros.  I tried to take it back because it basically wiped out my bank account.  They would not let me.  They told me you can't take payments back. 

 

Even regular ole checks these days are often turned into instant transactions.  And you cannot take it back once it has gone through.  So to say this must be done with an expensive wire transfer just seems ridiculous to me. 

[Seasider]

To be honest, I'd bear that extra expense for the peace of mind knowing that the mortgage was paid off in a highly documentable way, and that you are free and clear, especially after the instrument going through numerous ownership changes.

 

TBH, I might even close that account so no further drafts could "accidentally" come out of it, in case they don't get all their i's dotted and t's crossed before the next cycle.

 

But that's just me. I like lots of proof that I'm no longer obligated financially.

[Arcadia]

We pay our mortgage through the bank ATM as we like to downpay the principal. What we did was to tag the remaining principal onto the second last payment and pay those just before it is due. Our property tax and insurance doesn’t go into escrow so we just get a letter from the mortgage company that we paid off our loan. Then we have to do the paperwork to check that the title is now ours with no lien.

 

Our current mortgage is finishing soon and since ours is with CitiMortgage, we can just walk in to a branch, pay up and close and activate the paperwork there. We pay property tax and insurance ourselves.

[Seasider]

And oh hey congrats on paying off the mortgage! That's a terrific accomplishment!

[Granny_Weatherwax]

I have no idea but...

Congratulations on paying off your mortgage!!!

 

:hurray:

[Zebra]

I have never heard that about an automatic transfer.  That one can take it back. 

 

I paid money to a charity using a debit card (which isn't that the same as an automatic transfer?) and due to a computer glitch the charity's website added on some zeros.  I tried to take it back because it basically wiped out my bank account.  They would not let me.  They told me you can't take payments back. 

 

Even regular ole checks these days are often turned into instant transactions.  And you cannot take it back once it has gone through.  So to say this must be done with an expensive wire transfer just seems ridiculous to me. 

 

A debit card transaction is something different from an automatic transfer, and there are different rules.  There are other kinds of transactions too.   I can't tell you the ins and outs of all of them, but there are different things with each kind of transaction.  Even though it seems like they are all the same thing to us, they aren't the same thing to the bank.

 

Also, I just reread the OP's post and she said her payment was something else.  Which sounds like when they take money from your account and it's almost like a check, you just don't write a check.   Which is different from a debit card transaction, or an automatic transfer.

 

FWIW, I had all these "automatic transfers" that were done on my account illegally and they were able to reverse them.   Because you have 60 days to dispute automatic transfers.  They weren't debit card transactions.      

 

I just know that they want guaranteed funds when they payoff a mortgage, and that most likely a government auditor is telling them they must do things this way or get in trouble.   

[sassenach]

I think that’s pretty standard. Super outdated, but not unheard of.

 

When my grandparents paid off their house, the bank made the last payment for them and sent them congratulatory flowers. Some banks are better than others.

[maize]

When we paid off a mortgage I walked into the bank and paid it in cash (final remaining amount was a few dollars). Is yours currently held by a bank with a physical branch?

[maize]

You might consider closing out the escrow account now and setting up insurance and property tax payments yourself. Mortgages generally do not require you use an escrow account of you have at least 20% equity.

[Katy]

If you're a military family I once had to do something like this (we were buying a previously foreclosed HUD home, and they required a large wire and deposit to accept our bid), and I think USAA did it for free.  I still had to go into a local bank (not USAA) and show a bunch of paperwork and my USAA ID card, but they wired the money for free.  We didn't have enough cash in our USAA account to handle it, so we literally paid cash to the local bank branch.  This was several years ago, so the policy may have changed (their ATM fee refunds were reduced since then), but ever since we keep open a USAA account with at least a couple thousand in it for situations like buying or selling a house.  Most years in between we just use it as a Christmas savings account.

 

Anyway, I just chose the neighborhood bank that's usually quiet around lunch time, went in, it all took less than ten minutes.  If you already have enough cash in USAA you can do it all over the phone.  Their insurance is way too expensive IMHO, but their banking services can't be beat.

[ChocolateReignRemix]

I bet that's what'd happen if you just send an over-payment. 

 

How about sending a "regular" payment a month ahead of the payoff date, that is equal to double a regular payment (or whatever the last two scheduled payments would be)? That'd presumably be a bit over your ultimate payoff amount since less time to accrue interest. 

 

They'll process it and send you a tiny refund, probably. It'd save you the wire fee.

 

Actually that may not happen, at least not without issue.  There is a specific process to getting a home mortgage cleared, part of which includes getting a payoff quote and sending in a wire transfer/cashier's check.  I strongly advise following the exact instructions sent by the bank or there is the distinct possibility of either an additional auto draft, or if that is shut off, a "missed" payment on a negative balance.

 

We had this occur with a 2nd mortgage in the past and it was a pain.  (In our defense the payoff paperwork didn't show up and we assumed the last payment being more than the payoff would keep us from having issues. Wrong.)

[Pegasus]

Thanks, everyone. I appreciate the alternative ideas and the cautionary advice to follow the given instructions to avoid any potential issues.  We will probably do just that, even though it is a pain.  The current mortgage holder does not have any physical locations near me, if anywhere.

 

Thanks for all the congratulations on paying off the mortgage as well. We selected a house well under the amount the banks were telling us we could "afford," took a 15 year loan, and never traded up or took out equity loans.

[LucyStoner]

That's standard procedure for mortgage payoffs.

 

This is probably about guaranteed funds.   With an automatic transfer, a person has 60 days to go back and tell the bank that they did not want that transfer to happen.  With a cashier's check, the funds are guaranteed, no one can go back and try to reverse it.   The company holding your mortgage might be willing to risk it with a monthly payment, but not with a mortgage payoff where they are going to hand a title over to you.

 

You could also do a wire transfer, but there's probably a $30 fee with that.   But, you can probably call your bank and arrange it over the phone with them.   I would call the place that you are sending the money from, and ask them what they suggest.

 

I know it's a pain, but hopefully it's a one time thing for you.

 

Yep, they do not want to release the title until they have confirmed the payoff.  It's also an example of laws and procedures not keeping up with times and technology.  

 

I remember my paper mortgage statements always had a little blurb about payoff instructions.  A call and delivery of a cashier's check or a wire transfer were involved.  

 

I would just be happy to be at the point where I could burn the mortgage.   Congrats.  

 

I 

[QueenCat]

That is normal for the final payment. 

[katilac]

There is a specific process to getting a home mortgage cleared

 

Yep. This article talks about some insurance details as well: 

 

https://www.kiplinger.com/article/real-estate/T040-C011-S002-what-you-must-know-about-paying-off-your-mortgage.html

[Carol in Cal.]

I ran into the exact same thing as the OP, and I specifically asked them if I just sent in more than I owed at the end if they would just refund the overage, and they said that no, they would refuse the payment AND charge me a late fee.  So.

 

I was just glad I checked.  They didn't send me any letters.  If I hadn't checked for some obscure other reason, I would have been screwed.

 

I have a friend who is a mortgage broker and I complained mightily to her about this, as it had never happened before.  Ah, she said, before you must have either paid off a house to buy another one (in escrow) or paid off a HELOC.  She was right.  And she said that for a  regular mortgage this stupid way is standard operating procedure. 

 

Good for you for paying off your mortgage!

 

 

I bet that's what'd happen if you just send an over-payment. 

 

How about sending a "regular" payment a month ahead of the payoff date, that is equal to double a regular payment (or whatever the last two scheduled payments would be)? That'd presumably be a bit over your ultimate payoff amount since less time to accrue interest. 

 

They'll process it and send you a tiny refund, probably. It'd save you the wire fee.

 

[sarasue7272]

I can overnight a cashiers check using my banks website. It does cost $20, but is very convenient. Maybe your bank has this option?

[Cosmos]

Congratulations on paying off your mortgage!

 

I had no idea it was that complicated. Our mortgage statements always have a little note to contact them if you are planning to pay it off, but I didn't realize the process would be so cumbersome. We will be getting to the end of ours in a couple of years so that's good to be prepared for.

 

I guess if it's going to be a pain in the neck, you might as well make an occasion out of it. Take the day off work, do the paperwork and then do something fun to celebrate! Champagne lunch maybe. At least that's what I'm going to suggest to dh. :)

[fairfarmhand]

Yes. That's been our experience.

 

 

[shawthorne44]

I'd had a loan that I paid off early,   I called them to get the payoff amount since I wasn't close, but I had a windfall.  There was some fees to release the lien on the house (or something).   I sent them a check.  Their office was in the next city, so mail was expected to be quick.   I still ended getting a check back for a couple of dollars.  

 

If I could do it over again, I'd pay the loan down to super close to the payoff by check, THEN gotten the payoff amount.  

 

[plansrme]

Be sure to follow up if you do not receive your promissory note marked "paid in full," or something similar, within a reasonable period of time, and then check it carefully when you do.  My mortgage company sent me an unsigned release of lien statement, which is worthless.  I followed up, the nitwit insisted that an unsigned lien was fine, we got into an argument. . ..  Anyway, I wrote a letter to which I never received a response, but I DID receive a signed release eventually.  I also followed up with my local deed office (or whatever it is called) to make sure it was properly recorded.  They confirmed that they'd received an unsigned release and returned it 'cause, you know, an unsigned release is worthless.  Anyway, it's all worked out now, but mortgage companies aren't really any better at knowing what to do with a paid-off mortgage than we are!