Should You Burn Your Mortgage When You're Done Paying It Off?

Uh, no. Although people do have “Mortgage Burning Parties.” In fact, take, for example, this little tale from the LA Times:

When he was a kid in Elmira, N.Y., title attorney James Wytock lived near a church that decided to hold a combination service-ceremony to commemorate paying off its mortgage.

Yep, you guessed it. “They set the church on fire and burnt it to the ground,” says Wytock, who is general counsel for the Chicago Title Insurance Co. in northern Virginia. “But the kicker is [that] the church was next door to the firehouse.”

Aside from the obvious advice of “try not to burn your house down once you finally own it,” you should also be sure to burn a copy of your mortgage, not the real thing. You may need it if you plan on selling. Inside, exactly what to do when you’ve finally paid it off.

There are several precautions you should take first.

For starters, call your lender about a month after you make your final payment to make sure you have, indeed, satisfied your debt. You may not be as current as you think.

Though it happens infrequently, sometimes a long-ago payment never made it to the lender’s mailbox and you’re actually a month behind.

Perhaps a late charge is still outstanding for a payment you forgot to make. Or maybe your escrow account is a little short, and there’s not enough money for the lender to pay your taxes or insurance one last time.

When your loan is paid in full, your lender will return your original mortgage and note, along with a document known as a “satisfaction of mortgages.”

The satisfaction is much like the notice automobile lenders stamp on the auto titles they return when your car loan is paid off. The only difference is that although the lender’s rubber-stamp statement is proof enough for most state governments that the car lien has been satisfied, a satisfaction of mortgage is a legal document that should be filed at the county courthouse.

Otherwise, title companies will be unable to verify that your mortgage has been paid off. And if they can’t do that, they won’t issue a clear title when you try to sell the place.

That may seem like your buyer’s problem, but it’s very much yours too. In most cases, subsequent lenders won’t close if there is a quirk in the title. Consequently, your sale can be held up for as long as it takes to clear the air, and that can be a while.

In some cases, sellers have had to sue their lenders to prove they’ve paid their loans in full. And every once in a while, the original lender is no longer in business, so verification is doubly complicated.

When you call your lender to see whether you’ve met all your obligations, ask what the procedures are regarding the satisfaction document. Some lenders will file the notice for you, but others don’t.

If your lender is in the do-it-yourself category, take the satisfaction to the local recorder’s office — or the Registrar of Deeds, as the recorder is known in some jurisdictions — for inclusion in the public records.

Every place has its own rules for this procedure, so call first to find out exactly what you must do to wipe your mortgage off the books forever. But whether the lender presents the satisfaction or you do, make sure it becomes a matter of record by getting back the original document with the filing date and time stamped and noted on it.

Once you’ve attended to this process, you can celebrate. But please, burn a copy of the mortgage, not the original document.

Hold off on the mortgage-burning party [LA Times]
(Photo: mike9alive)

Comments

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  1. Snakeophelia says:

    I’ve never been much for burning things for purely symbolic reasons – mortgage documents, bras, love letters from ex-boyfriends. If it’s done, it’s done – I don’t need flame and ashes to feel it!

    And wouldn’t you want to frame that sucker, rather than burn it?

  2. Ray Wert Jr says:

    @Snakeophelia: And refresh your mind that you just paid 3x the sticker of a 30 year old house?

  3. Crazytree says:

    Hold all documents for three years.

    This gives time for the expiration of the Statute of Limitations for most contracts in MOST jurisdictions.

    You may have actionable claims against parties involved in your mortgage [or trust deed if you live in CA] so it is never wise to destroy potential evidence before the expiration of any claim you may hold.

    Alternatively, do what I do and scan all documents to PDF and put them in your safe deposit box and forget about them.

  4. dohtem says:

    @Ray Wert Jr: What a way to look at it!!

    Try this one; just for renting the house for 30 years, you get it free!

  5. swalve says:

    Or you can get a 15 year mortgage and only pay 1.5x sticker.

  6. lore says:

    @Snakeophelia: I actually think you *should* burn your ex-boyfriend’s bras. If I were a woman, I’m not sure I’d want those hanging around.

  7. MentalDisconnect says:

    I have to admit I enjoy the glowing kitten. Burn the mortgage or not, but don’t burn the kitten!

  8. Ben Popken says:

    @MentalDisconnect: I think the kitten conjured the fire.

  9. cgmaetc says:

    Yay! We paid off our mortgage! Now we own our house free and clear… Right?

    Wrong. Stop paying property taxes on that sucker and then you’ll see who really owns that house.

    So much for the American Dream.

  10. Michael says:

    @cgmaetc: What the hell is wrong with you, seriously? And what the hell has happened to this website?

    I remember during the Flickr image scandal (if no one remembers, Ben was taking images from Flickr and not giving credit, and then said he would not give credit), someone on Digg called this website “Fox News for consumers”. Although I didn’t agree with the comment at the time, this site’s readership has certainly devolved to such a level.

    I know I shouldn’t whine–if I don’t like it close the browser window, etc. etc.–but I mourn the days when Gawker sites were exclusive and full of funny, witty commenters.

  11. SexCpotatoes says:

    yeah, taxes for my house run slightly above $1200 a year, that wouldn’t be much of a hardship, if my mortgage was paid off, cgmaetc

  12. Trackback says:

    The LA Times has an amusing yet serious article on why you should not actually burn your mortgage once you have paid it off. Besides the obvious danger of catching your house on fire, you will need evidence that your loan is paid in full if and when you decide to sell.

  13. John Stracke says:

    @cgmaetc: Yeah, I hate property taxes. It’s not that I’m a tax objector; I just think that property is an essential for a free society. An income tax makes more sense: pay tax on the money once when you get it, and then you’re done.