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Your Mortgage Is Paid Off: What to Do Now?

Once a mortgage loan is paid in full there are still some common issues that need to be taken care of, and others that may arise unexpectedly. It is prudent to understand what to do relative to the common issue of finalizing your mortgage, and then there are special issues that may arise that may require simple legal processes and others that are serious enough may warrant hiring an attorney.

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    Because savings interest rates are at an historical low, many homeowners with a mortgage are accelerating their payments to take advantage of the situation, but they may be uncertain what to do after sending in the final payment. Two things that immediately come to mind are stop any automatic payments which are now not required and contact the insurance underwriters to cancel your private mortgage insurance (PMI).

    When homeowners are at the closing for their property among all the paper work that is involved at that time they are given two documents to sign, a promissory note and a mortgage document, also known a deed of trust. The deed of trust was legally filed at the local land record’s office in the county where their property is located. Once the mortgage has been paid in full the property owner must make certain that the deed of trust is officially released from the land records. This is accomplished by filing a certificate of satisfaction for those same land records.

    Some lenders will actually do this for the homeowner and arrange for the release to be recorded for a slight fee, yet others will simply send them the promissory note that is marked "paid and canceled". Then the home owner must go and record the release themselves.

    In a situation where the homeowner is making the mortgage payments directly to the seller or a private individual they must make certain that when they make the final payment they are simultaneously given back the note.

    Regarding their PMI they are a few things to clear. One task that is standard practice for homeowners who have PMI coverage is to notify the insurance carrier that the mortgage is no longer in force, and paid in full, and that there is no longer a need for the PMI coverage. The next thing that needs to be done, relative to the insurance, is to notify the local real estate taxing authorities and let them know to start sending the original tax bills to them, assuming that they have been escrowing for taxes and insurance.

    The final thing that should be done is the one that the home owner has worked years to achieve, stopping any automatic mortgage payments from their bank to the lender.
  1. What happens when a defect is uncovered and how to hopefully get the builder or seller to fix the problem and pick up the costs?

Example: John Q. Homeowner purchased a new home from a large developer just about a year ago. Previous to the purchase, he had the home inspected and the inspector found a defect. In one corner of the unfinished basement moisture was seen around the metal tabs that are used to join the poured concrete forms during construction. The inspector surmised it was due to water coming from the downspout outside.

The builder was contacted and he adjusted the downspout. He then performed a test by running water into the downspout for about a half an hour and no new evidence of water was found. John Q. then closed on his new home shortly thereafter.

Now a few months have gone by and whenever it rains, moisture accumulates in that same area, plus it is now showing in other places as well. Next came winter time and frost was seen on the inside of the foundation and so the builder is contacted again to have a look and take some tests. The tests showed that heat was being lost in these areas where the frost had formed so the builder then sprayed more insulating foam in those areas in an attempt to fix the problem, which it did.

However, once the winter had passed, and spring had rolled around, the foundation was again leaking moisture and a professional waterproofing company was hired to inspect and hopefully fix the problem once and for all. The waterproofing technician says that the builder used too little waterproofing material on the outside walls and that is the cause of the problem.

John Q Homeowner then decides to contact the builder again and ask them what they will do to finally solve this ongoing problem once and for all.  The builder seems to vanish into thin air and does not reply to John Q’s last request.

The most important thing to check now is kind of warranty did John Q. Homeowner get from the builder? John Q must now review his warranty and all of the different documents he was given by the builder, including any promotional information that he may have received before signing the contracts. He should also now consult with his attorney to find out if there are any laws in his state regarding new-home warranties. His attorney may contact the state’s attorney to get more detailed information and he himself can also look this up on the Internet.

John Q. should also have a certified report written up by the waterproofing inspector and a certified structural engineer that will also show how to rectify the problems and estimate the costs of doing so.

John Q’s next move is to contact the builder again in writing and send a strong letter to the builder, with a copy to your state's attorney general, giving the builder fourteen days to reply. Most often this will achieve the desired results, however if it does not John Q must now decide to proceed with litigation or not.

In many cases the time and cost of hiring an attorney will not be of any real benefit to John Q, his attorney will have to advise him now on his options. If the situation is a relatively small one then it may be best for John Q to just get the repairs done by himself and pay the costs.

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