Mortgage Pay Off...best method?

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TruthHurts87
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Mortgage Pay Off...best method?

Post by TruthHurts87 » Sun Jul 29, 2018 12:48 pm

Hello all! First time poster here.

I requested a pay off letter and I received it yesterday. I was wondering what is the best method for paying off the mortgage? I was given a few options, such as: send certified check, go to the branch, wire the funds (involves fees), ACH pull from my bank account.

I figured ACH pull from my bank account would be the quickest and won't involve any fees, but do I risk giving them complete access and pull more than they need to? Should I keep a few dollars more than the payoff amount and transfer the rest into another account?

After the payoff, is there anything else that needs to be done on my part?

I'm probably being too paranoid. It is a fairly large amount (6 figures) and I'm not sure how the process works.

Any help is truly appreciated!

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Pajamas
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Re: Mortgage Pay Off...best method?

Post by Pajamas » Sun Jul 29, 2018 1:17 pm

Why not go by the branch and take care of it so you can ask any questions and not have to worry that the transaction is not complete?

I had to ask my mortgage lender to file releases with the city. Should have been done automatically but it wasn't and it could have caused problems later when selling and been much more difficult to correct.

https://www.washingtonpost.com/news/whe ... r-mortgage

You might do a search to see if there is anything peculiar to your city or state.

mortfree
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Re: Mortgage Pay Off...best method?

Post by mortfree » Sun Jul 29, 2018 1:44 pm

If you are 31 based on your userid, the simplest answer is don’t pay it off.

TruthHurts87
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Re: Mortgage Pay Off...best method?

Post by TruthHurts87 » Sun Jul 29, 2018 1:57 pm

mortfree wrote:
Sun Jul 29, 2018 1:44 pm
If you are 31 based on your userid, the simplest answer is don’t pay it off.
Yes, I am 31.

Any reasoning as to why not pay it off? I got the loan in 2011 @ 4.5% 30 yr conventional, but never refinanced since then. I don't have any debt besides the mortgage. I am self employed, so I only have a Roth IRA which I started this year (pretty late, I know) and maxed the contributions. I'll also have a pretty decent cash reserve (mid to high 6 figures) even after the pay off to invest long term.
Last edited by TruthHurts87 on Sun Jul 29, 2018 2:24 pm, edited 1 time in total.

mortfree
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Re: Mortgage Pay Off...best method?

Post by mortfree » Sun Jul 29, 2018 2:12 pm

Deleted

May have derailed thread
Last edited by mortfree on Sun Jul 29, 2018 5:44 pm, edited 1 time in total.

MindBogler
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Re: Mortgage Pay Off...best method?

Post by MindBogler » Sun Jul 29, 2018 3:46 pm

TruthHurts87 wrote:
Sun Jul 29, 2018 1:57 pm
Any reasoning as to why not pay it off? I got the loan in 2011 @ 4.5% 30 yr conventional, but never refinanced since then. I don't have any debt besides the mortgage. I am self employed, so I only have a Roth IRA which I started this year (pretty late, I know) and maxed the contributions. I'll also have a pretty decent cash reserve (mid to high 6 figures) even after the pay off to invest long term.
You missed your opportunity to refinance to absurdly low rates on 15 and 30 year mortgages. But, a 4.5% loan isn't that bad in the grand scheme of things historically. There is surely some crossover point where paying your mortgage makes more sense than investing, but you are nowhere near that point. Under almost any conceivable scenario having the cash in liquid form is superior to paying off the mortgage in your situation. You have options with invested money. If you can't work for some time, money in the bank or the brokerage is superior to an accelerated mortgage payoff. The biggest risk of accelerating a mortgage is that something goes wrong before you pay it off. Now you need money and maybe you can't access it. You shouldn't trust your livelihood to the idea that a bank will give you another loan or not call your home equity loan when you need it the most.

So, I'll give my boilerplate advice: save your money in a taxable account. Invest it with a conservative allocation using tax free bonds and Vanguard Total Stock Market or similar. In the meantime you'll continue paying on the mortgage. When you have enough money in this account, decide if you want to pay off your house or not. The liquidity is far more valuable than a partially paid off home. This is an obvious fact and do not let your emotions get in the way.

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BL
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Re: Mortgage Pay Off...best method?

Post by BL » Sun Jul 29, 2018 4:01 pm

It sounds like you have almost no retirement accounts. You might be able to set one up for your job: perhaps check this Vanguard page for a comparison of various possibilities (not necessarily pushing V as others may be even better, just happen to be familiar with this page):
https://investor.vanguard.com/what-we-o ... s/overview

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LadyGeek
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Re: Mortgage Pay Off...best method?

Post by LadyGeek » Sun Jul 29, 2018 4:03 pm

TruthHurts87 wrote:
Sun Jul 29, 2018 1:57 pm
Yes, I am 31.

Any reasoning as to why not pay it off? I got the loan in 2011 @ 4.5% 30 yr conventional, but never refinanced since then. I don't have any debt besides the mortgage. I am self employed, so I only have a Roth IRA which I started this year (pretty late, I know) and maxed the contributions. I'll also have a pretty decent cash reserve (mid to high 6 figures) even after the pay off to invest long term.
Welcome! If you have a "decent" cash reserve after the loan payoff, then by all means pay it off. There's nothing like having peace-of-mind knowing that a large monthly expense is gone.

I wouldn't continue to pay a monthly mortgage on the possibility that something bad "might" happen. The money needed to handle unexpected events should be set aside from your investing. See: Emergency fund. Get that done first.

Then, you should focus on your investments needed for retirement. Start here: Getting started
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jimb_fromATL
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Re: Mortgage Pay Off...best method?

Post by jimb_fromATL » Sun Jul 29, 2018 4:05 pm

TruthHurts87 wrote:
Sun Jul 29, 2018 1:57 pm
mortfree wrote:
Sun Jul 29, 2018 1:44 pm
If you are 31 based on your userid, the simplest answer is don’t pay it off.
Yes, I am 31.

Any reasoning as to why not pay it off? I got the loan in 2011 @ 4.5% 30 yr conventional, but never refinanced since then. I don't have any debt besides the mortgage. I am self employed, so I only have a Roth IRA which I started this year (pretty late, I know) and maxed the contributions. I'll also have a pretty decent cash reserve (mid to high 6 figures) even after the pay off to invest long term.
Whoa!!! Are you talking about paying off the mortgage with cash in a single lump sum?
How much money is that?

What are your top tax brackets for federal and state?
How much money do you have to spare to after all the bills are paid each month?

Are you married? If so, are y'all contributing the max of $11,000 to two Roth IRAs each year? (You can do that even if the spouse is not working ... as long as your total earned income is enough to cover both.

If you are self-employed and have enough income to accumulate a big chunk of money in a fairly short time, chances are you'd be better off opening up a SEP or other tax-deferred retirement plan and investing a bunch there in addition to the Roth IRA before paying down the mortgage too fast.

That's because if you don't have a huge pension or other income from some other source already vested for retirement, chances are you'll pay a lower percentage of income tax on your income in retirement than you will get to defer in your highest bracket and invest for yourself now if you contribute to a tax-deferred retirement account.

Bear in mind that you can withdraw contributions from a Roth IRA at any time without tax or penalty. So it can serve as a last-ditch source of emergency funds if you need it. (This also means that if you are married but not contributing the max to Roth IRAs for both spouses, the spousal Roth would be better before you build up even more emergency cash reserves ... and higher priority than paying off the mortgage.

Furthermore, the best time to owe money or borrow money is when you already have more than enough to pay off the debt already, since there is no risk that you might not be able to make the payments if you were to have your income interrupted for quite some time. And you stand a better chance of earning more compound interest on a large lump sum over a long period of time than you're likely to save by paying off the debt faster.

Still ... regardless of which is the best use of your money ... I can vouch from experience that no matter how much more you might be able to earn by keeping the mortgage and investing the money, there is no way to put a numeric value on the tremendous feeling of well-being and lack of worry when you don't ever have to worry about being able to make the mortgage payment.

It's just that it's also a good feeling to know that when you have a lot of income and contribute more to a tax-deferred retirement plan, you're getting to keep more of your money to invest for yourself instead if giving too much of it earlier than necessary to the gubbament to do whatever the heck they will do with it that may not benefit you quite as directly. And of course you don't need nearly as much cash set aside for emergencies if you won't need to make the mortgage payment.

Got more details?

jimb

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LadyGeek
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Re: Mortgage Pay Off...best method?

Post by LadyGeek » Sun Jul 29, 2018 4:11 pm

jimb_fromATL wrote:
Sun Jul 29, 2018 4:05 pm
Still ... regardless of which is the best use of your money ... I can vouch from experience that no matter how much more you might be able to earn by keeping the mortgage and investing the money, there is no way to put a numeric value on the tremendous feeling of well-being and lack of worry when you don't ever have to worry about being able to make the mortgage payment.

... And of course you don't need nearly as much cash set aside for emergencies if you won't need to make the mortgage payment.
^^^ This summarizes my previous post.

TruthHurts87 - Before this thread deep-dives to help you with your investments, have we answered the basic question of "how" to payoff your mortgage (what you asked in the first place)?

BTW, If you have any questions, just ask. If you don't understand something, please let us know and we'll try again.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Elbukari
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Re: Mortgage Pay Off...best method?

Post by Elbukari » Sun Jul 29, 2018 4:20 pm

OP- easiest way is to get a cashiers check. Go to your bank (make sure you have all the funds in your account) and get the cashiers check for however much you need to pay off the house. There is $10-$15 fee, but it's easy. My branch did not accept $110k in cash. I'm not sure many (or any) lenders do.

Make sure however that you still have money in reserve for an emergency. Don't go down to 0.

sport
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Re: Mortgage Pay Off...best method?

Post by sport » Sun Jul 29, 2018 4:40 pm

We had a mortgage on the new house until the old one sold. We had the mortgage with a local B&M bank. When the old house sold and we received the money, I asked for the payoff amount. I then went to a branch office of the bank and wrote them a check. The teller congratulated us.

epictetus
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Re: Mortgage Pay Off...best method?

Post by epictetus » Sun Jul 29, 2018 6:18 pm

I would suggest going to the branch and writing them a check. They can look at it and make sure it looks ok and all is in order and you can ask any questions you might have.
Focus on what you can control

thelimocat
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Re: Mortgage Pay Off...best method?

Post by thelimocat » Sun Jul 29, 2018 8:11 pm

Just walk into your bank and tell them you wish to do an ACH transfer to your lending institution. Your lender can provide all the account/transfer information for their end. Put the money in your checking account so its transferred out of there. It's simple and painless. Plus theres a record and they do millions a day. Most of our deposits come in that way so you might say we use it all the time.

Just my two cents.

CurlyDave
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Re: Mortgage Pay Off...best method?

Post by CurlyDave » Mon Jul 30, 2018 3:01 am

MindBogler wrote:
Sun Jul 29, 2018 3:46 pm
TruthHurts87 wrote:
Sun Jul 29, 2018 1:57 pm
Any reasoning as to why not pay it off? I got the loan in 2011 @ 4.5% 30 yr conventional, but never refinanced since then. I don't have any debt besides the mortgage. I am self employed, so I only have a Roth IRA which I started this year (pretty late, I know) and maxed the contributions. I'll also have a pretty decent cash reserve (mid to high 6 figures) even after the pay off to invest long term.
You missed your opportunity to refinance to absurdly low rates on 15 and 30 year mortgages. But, a 4.5% loan isn't that bad in the grand scheme of things historically. There is surely some crossover point where paying your mortgage makes more sense than investing, but you are nowhere near that point. Under almost any conceivable scenario having the cash in liquid form is superior to paying off the mortgage in your situation. You have options with invested money. If you can't work for some time, money in the bank or the brokerage is superior to an accelerated mortgage payoff. The biggest risk of accelerating a mortgage is that something goes wrong before you pay it off. Now you need money and maybe you can't access it. You shouldn't trust your livelihood to the idea that a bank will give you another loan or not call your home equity loan when you need it the most.

So, I'll give my boilerplate advice: save your money in a taxable account. Invest it with a conservative allocation using tax free bonds and Vanguard Total Stock Market or similar. In the meantime you'll continue paying on the mortgage. When you have enough money in this account, decide if you want to pay off your house or not. The liquidity is far more valuable than a partially paid off home. This is an obvious fact and do not let your emotions get in the way.
+1

Liquidity is very important.

I would far rather have a extra $1M in my brokerage account and have a $1M mortgage than have the mortgage paid off and not have the $1M in the account. All you need to do to come out ahead is to get more than 4.5% nominal (not even real) return on your money and you are better off with the mortgage.

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stickman731
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Re: Mortgage Pay Off...best method?

Post by stickman731 » Mon Jul 30, 2018 5:01 am

Go to the branch and pay it off. Person to Person interaction in my opinion is the best. After paying it off remember to notify your municipal tax collector and your home insurance provider to send you all their documents so you do not get hit with late fees.

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goingup
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Re: Mortgage Pay Off...best method?

Post by goingup » Mon Jul 30, 2018 9:48 am

My big bank required a wire transaction. The instructions and payoff amount could be pulled up on-line (no payoff letter needed). I went to the branch and wired the payoff amount to the mortgage arm of that big bank.

The result was immediate. The next day I pulled up the mortgage account on line and it said PAID IN FULL. :D

The other methods you mention (certified check, ACH) may not require up front fees, but there is a daily mortgage interest accrual while the payment is in transit. Really, the costs of any method you pick are small compared to the big accomplishment of paying of the mortgage. After that is done you really might want to focus on investing your savings for retirement.

TruthHurts87
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Re: Mortgage Pay Off...best method?

Post by TruthHurts87 » Mon Jul 30, 2018 11:06 am

I want to thank everyone for their response and suggestions!

I called the lending bank and they only accept cashier's checks in branch. No ACH or wiring options available.

My bank where the funds are is an online only bank. It would be tough to get a cashier's check out to me in time. Looks like I'll be doing an ACH transfer via the phone.

Thanks again, y'all!

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Re: Mortgage Pay Off...best method?

Post by Tim_S » Mon Jul 30, 2018 11:21 am

We took are money directly to the bank and did the transaction there. Easy to do and then there is no monkey business. Walked out with a zero balance receipt. The peace of mind of a paid off mortgage is wonderful. If you have the funds do it today!
“Don’t look for the needle in the haystack. Just buy the haystack.” John Bogle

TruthHurts87
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Re: Mortgage Pay Off...best method?

Post by TruthHurts87 » Mon Jul 30, 2018 11:39 am

It's done! :D

ACH via phone was smooth. Will receive PIF letter and escrow check soon. Deed within 45 days.

Greatest feeling in the world!

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Re: Mortgage Pay Off...best method?

Post by LadyGeek » Mon Jul 30, 2018 3:20 pm

:beer Once you have the letter in hand, don't forget to:

- Change the owner of record your homeowner's policy (remove the lien). Check with the insurance company on what's needed to document the change.
- Update your budget to include the tax bills that you will be paying yourself now.
- Gloat all you want in this thread: Post your Financial Milestone Announcements Here
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mortfree
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Re: Mortgage Pay Off...best method?

Post by mortfree » Mon Jul 30, 2018 4:59 pm

LadyGeek wrote:
Mon Jul 30, 2018 3:20 pm
:beer Once you have the letter in hand, don't forget to:

- Change the owner of record your homeowner's policy (remove the lien). Check with the insurance company on what's needed to document the change.
- Update your budget to include the tax bills that you will be paying yourself now.
- Gloat all you want in this thread: Post your Financial Milestone Announcements Here
And tell no one else

tesuzuki2002
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Re: Mortgage Pay Off...best method?

Post by tesuzuki2002 » Mon Jul 30, 2018 5:35 pm

TruthHurts87 wrote:
Sun Jul 29, 2018 12:48 pm
Hello all! First time poster here.

I requested a pay off letter and I received it yesterday. I was wondering what is the best method for paying off the mortgage? I was given a few options, such as: send certified check, go to the branch, wire the funds (involves fees), ACH pull from my bank account.

I figured ACH pull from my bank account would be the quickest and won't involve any fees, but do I risk giving them complete access and pull more than they need to? Should I keep a few dollars more than the payoff amount and transfer the rest into another account?

After the payoff, is there anything else that needs to be done on my part?

I'm probably being too paranoid. It is a fairly large amount (6 figures) and I'm not sure how the process works.

Any help is truly appreciated!
I started 2 months ago with an aggressive pay down... I am not seeking a pay off letter from my mortgage servicer. I am paying off $15K a month.. It will be paid off in 5 or 6 Months depending on how the last month goes...

ConcernedKid
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Re: Mortgage Pay Off...best method?

Post by ConcernedKid » Mon Jul 30, 2018 6:28 pm

I'm going to make an outside of the box suggestion. If you have a rewards generating or cash back credit card that is a Mastercard, you should use Plastiq to make a series of fee-free $250 payments to your lender and use your cash on hand to pay off the credit card bill. The fee-free promotion for Mastercards lasts through September IIRC. You might as well get something in return for the huge cash outlay.

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