Paying off your home loan is a big deal, so ensure it's done correctly to avoid future complications. If your home loan was secured by a deed of trust -- often called a mortgage in some states -- the lender should officially release you from further payment obligations when you pay off the loan. Lenders provide certain documents that allow you to receive the deed to your home. Without this paperwork and formal filing at your local government's land records office, your lender may still hold an interest in your home.
Promissory Note, Trust Deed and Mortgage
Lenders typically send you both the cancelled promissory note and cancelled deed of trust or mortgage, after payoff. However, some lenders may just send the original promissory note that you signed at closing, marked "paid and canceled." You need more than this to get the deed to your home. Take initiative by asking the lender whether it will send a lien release document directly to your local land records office on your behalf. If it doesn't, you must finalize the process by filing the release with the recorder's office and receive your deed.
Release of Deed of Trust or Satisfaction of Mortgage
Depending on whether your home loan was originally secured by a deed of trust, also known as a trust deed, or by a mortgage, one of two lien release documents must go to your jurisdiction's recorder or tax assessor's office. The lien release forms are called the release of deed of trust or satisfaction of mortgage. Request a certified copy from the government office if your lender didn't send these to you. Once cleared by the recorder's office, it can send you the official deed to your home.
Safeguarding Your Payoff Paperwork
For future personal reference, electronically file the documents your lender sends you or that you obtained from the recorder's office. Scan any letter the lender may have sent you stating the loan is paid in full, plus the original promissory note, and cancelled deed of trust or mortgage, into your computer. In addition to the lien release filed with your jurisdiction, these serve as proof that you own your home free and clear. Once you receive the deed to your home, scan it and keep it in a safe deposit box or a fire-proof safe.
Your proof of home-loan payoff comes in handy if the last lender that serviced your loan payments sells your account to another loan servicing company right before or during the payoff process. You can send your saved copies to the new loan servicer to prove you no longer owe anything.
You also must notify your homeowner's insurance carrier of the mortgage payoff to have the lender removed as a beneficiary from your policy. Also, if your home loan had an escrow account for the collection of homeowners insurance and property taxes, it is no longer in effect. That means, you are solely responsible for paying the insurance provider and tax assessor directly.