When it comes to transferring real property, nothing is more important than clear title. An encumbered title can slow the transfer — and even result in the denial of — title insurance. Debt is recorded against property title when it is incurred. Consequently, when you pay off a mortgage, you have to be sure the debt satisfaction is recorded as well. If you plan to leave real estate to a beneficiary — whether child, grandchild or non-relative — the biggest favor you can do is to clear the title while you live. Paying off the mortgage before deed transfer is a matter of following instructions carefully.
Get the Payoff Amount
You may have the balance amount from your last statement on hand. However, interest calculations may have altered that figure. In addition, if your mortgage includes an escrow account, you'll need to find out from the lender how those amounts affect the payoff amount. The lender can quote you the payoff figure as of a given date.
Pay Off the Mortgage
You can hand deliver the payment to the lender for peace of mind if you like. Otherwise, use certified or registered mail for proof-of-mailing and tracking purposes. The payoff amount is valid only for a certain number of days, so ensure the bank receives the payment in time.
Look Out for Debt Satisfaction Documentation
Once the debt is paid in full, the lender should send you the original of the mortgage, the original promissory note marked as paid, and the satisfaction of mortgage, a legal document. In place of the legal document, the bank may send along a letter that reports you have satisfied the mortgage. Whether through oversight or not, banks have been known to send only one or two of the required documents — or to send nothing at all. Fortunately, the law requires that the lender provide you with documentation to record the satisfaction of the debt. If you do not receive your documents, get in touch with the bank to request them.
Record the Satisfaction
Once you have received the required documents, visit the county office that is responsible for maintaining deed records. It may be titled the county recorder, county clerk or registrar of deeds. You may discover that the lender has been kind enough to file the satisfaction of mortgage for you. But by no means should you rely on any other party to take this step. File the satisfaction of mortgage document in person, following the office's instructions to the letter. When you leave the office with the time- and date-stamped original in your hand, you can feel easy about transferring the deed.