July 31, 2016

Paying Off a Mortgage

I paid off my mortgage. I have the letter from the mortgage bank to make it official. The letter is about step five in the process. My friends are more interested in this story than I had expected, but it makes sense when I think about it. In a world where perpetual debt has become the norm, who do I know who paid off their house while still living there? Sure, people are constantly selling houses, buying new ones, paying off the old mortgage, and taking out a new one, but that’s a different process. What is it like, in the Internet mortgage servicing era, if you are going to pay off a mortgage and keep living in the house? Friends are looking to my story to find out.

Without going through the whole story, these are key events:

  1. On the online payment page for the mortgage account, the borrower makes extra principal payments. Eventually, there is no more principal to pay. The principal balance might not have to be exactly zero, but should be pretty close.
  2. The bank decides it has received enough payments and closes the mortgage account. At this point, the borrower couldn’t make another payment if they wanted to because the account is closed.
  3. Before the next payment would have been due, the bank conducts a “thorough” review of the account, then sends the borrower a “satisfaction” letter that says the loan is paid back and the account is closed. I got the letter in the mail even though everything else about the mortgage was online. It is this letter that releases the borrower from the obligations of the mortgage, such as having to maintain insurance on the building.

After paying a mortgage for 120 months, paying other debts seems easy. This month’s credit card purchases . . . including a set of tires? No problem! Having no housing payment to make will turn my monthly budget on its head, and if I haven’t seen that effect yet, it’s just because I’m working my way through a small backlog of more routine debts. It is harder than it sounds to be completely, absolutely out of debt, even just for a day. By the time you pay the last bill, there is a new one. On the other hand, paying everything more or less as it comes in means that money is in the flow again. It is a different energy and feeling than you get facing the same debt month after month.

This is one of the reasons I made it a priority to get out of debt. Debt can become a bad habit. People may try to forget about debt, thinking about it as little as possible, or debt becomes part of who they are and they see themselves making debt payments every month forever. Either way is not a powerful approach to the world. Powerful is foregoing other expenses to pay off the debt, then the next month when there is no debt payment to make, looking at your options and saying, “Hmm!”

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