Paying off your mortgage is a huge milestone and accomplishment for any homeowner. You may want to jump right into celebrating, but first you need to make sure all the proper documentation is in order. A satisfaction of mortgage is a crucial document in the mortgage repayment process. It shows that your home outright belongs to you. While it’s up to your lender to complete this paperwork, understanding its significance is important for any homeowner. A financial advisor can help you with mortgages or any other financial planning questions.
A satisfaction of mortgage, also known as release, cancellation or discharge of mortgage, is a type of legal document that proves you paid your mortgage in full. As a result, it also certifies that the property’s title is clear of any liens. If there are any other applicable details, the satisfaction of mortgage includes those as well. The document is critical to update your records of ownership for the real estate and your credit history. If your lender fails to complete it, it may lead to issues down the line. For example, you may want to refinance or sell your home one day. Confusion about title ownership can complicate that process.
Your lender is in charge of handling your satisfaction of mortgage paperwork. While the core document is the same everywhere, the process to complete it will depend on where you live and your local laws.
The process starts once you finish paying off your loan. So, say you have a 30-year mortgage. Once you make the last payment when the loan hits full-term, your lender will issue a notice. This official notice declares that you completed the mortgage and that you own the property outright. The notice also documents that the lender filed a satisfaction of mortgage with the correct local authorities, such as a recorder of deeds. If the mortgage provider has any other significant details regarding the discharge of your mortgage, they’ll let you know at this time.
Because of the way a satisfaction of mortgage works, it can be helpful for anyone making extra mortgage payments. Paying off your mortgage early can sometimes result in title confusion, which the satisfaction of mortgage clears up. A satisfaction of mortgage does more than mark the end of your repayment period, though. It also helps you in the future if you want to borrow against your home. By showing that you fully own your home as an asset, lenders will see you as a safer borrower.
Let’s say you just made your final payment on a 30-year fixed-rate mortgage. Once you finish, your mortgage lender should take steps to prepare a satisfaction of mortgage. From there, they should file it with the correct authorities after it’s signed and notarized. Even if your original lender sold your loan to a mortgage servicer (or any other company), the process stays the same. But the buyer becomes responsible for completing the satisfaction of mortgage instead.
When that process finishes, you can use the document to your benefit. For example, you may want to sell the property one day or use it as collateral to secure another loan. In that case, you need to prove you own your property free and clear without any liens against it. A satisfaction of mortgage acts as that proof.
There are multiple steps to obtain a satisfaction of mortgage. The length of the overall process varies from state to state due to local laws. However, it generally takes around 30 days and most states give lenders fewer than 90 days to complete the document.
The first step requires a written acknowledgment. Your lender will need to document that you made your final payment, completing your repayment period. This document, sometimes called a “release” or “satisfaction,” must be notarized and entered into your county’s official records.
After that, the lender must notify you (the property owner) that they have completed the filing. This notification should also alert you to the release of the lien, and you now have legal ownership of the property title.
Unfortunately, a lender may fail to record a satisfaction of mortgage within the allotted timeline. Most try to avoid this due to potential legal costs or fines. But if the required time period passes without the filing occurring, the property owner can try contacting the loan servicer. If the lender went out of business, the owner could see about receiving a lien release from the Federal Deposit Insurance Corporation.
However, if the lender is still in business, the property owner can seek out legal guidance. Depending on your situation, you may file a lawsuit to obtain a court order that requires the lender to finish the satisfaction of mortgage process.
Alternatively, you can also pursue a quiet title action. This is a lawsuit that clears any liens or clouds from the title of your real estate.
A satisfaction of mortgage is a crucial document for any homeowner. Not only does it prove your ownership, but it allows you to use your home as you see fit. Whether you want to put your home up for sale or refinance it, you’ll need that document.
For some, paying off your mortgage completely may still be far into the future, though. If you want to pay your mortgage off early and get that satisfaction of mortgage, consider speaking to your lender. You’ll need to make sure that they do not require a prepayment penalty. If there are no restrictions about additional payments, then you can go ahead and talk to a financial advisor. They can help you find a new budget that accommodates your goal.
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Ashley KilroyAshley Kilroy is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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