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)