Lew Sichelman
A couple of years ago, the congregation of the Metropolitan Community Church of the Palm Beaches in Florida celebrated making the final payment on the church’s mortgage by burning the document. It’s a ritual that dates back more than a century.
In the 1900s, observing the end of a borrower’s promissory note by lighting a match to the papers was a big deal, often celebrated at a party with friends and family. Nowadays, it seems like only churches observe that rite. Christ Our Redeemer Church in Irvine, California, did so when it paid off its loan in 2011, and the Mt. Pisgah Baptist Church in Orangeburg, South Carolina, did the same in 2022.
Few homeowners celebrate the end of their financing these days, for several reasons. One: Not that many people actually carry their mortgage to its full term. Best-guess estimates in the industry suggest that less than 16 percent of all home loans reach maturity.
And two: Holding a mortgage-burning party is now considered rather gauche. In a 2010 column, Miss Manners, the prime arbiter of etiquette, wrote that these parties fall into the “self-congratulatory” category, and are therefore in poor taste. If you still want to lionize the event, some suggest only immediate family should be invited.
But this advice columnist has a different take: Party or not, don’t take a match to your mortgage when you make your final payment. At least not immediately. There are several precautions you should take first.
First, Make Sure You’re Actually Done
For starters, call your lender about a month after you make your last payment to make sure you have really satisfied your obligation. You may not be as current as you think. For example, if a long-ago payment never made it to the lender’s mailbox, you may actually be a month behind.
Perhaps a charge is still outstanding for a missed or late payment. Or maybe the escrow accounts the lender uses to pay your property taxes or homeowner’s insurance are a tad light, and there’s not enough in the till to cover them one last time.
Once you determine you are actually free and clear, your lender is supposed to return your original mortgage and note, along with something known as a “satisfaction of mortgage” document – similar to the notice auto lenders stamp on the title to your vehicle when your car loan is paid off.
But there’s a big difference: While a rubber-stamped statement is proof enough for most states that your car lien is paid in full, the satisfaction piece, as some lawyers call it, is a legal document that should be filed at the county courthouse.
Otherwise, title companies will be unable to verify that your loan has been paid. And if they can’t do that, they won’t be able to issue a clear title if and when you try to sell the place. While that may seem like the buyer’s problem, it’s yours.
In most cases, subsequent lenders won’t close if there is a quirk in the title. Your sale can be held up for as long as it takes to clear the air – which could be quite some time. In some cases, according to title attorneys, sellers have had to sue their lenders to prove they’ve met their obligation. If the lender is no longer in business, verification is even more difficult.
What to Ask For
When you call your lender, also ask about the procedures regarding the satisfaction document. Some lenders will file the notice with the county as a matter of practice, but others leave it to borrowers to do so.
If your lender is the do-it-yourself variety, take the satisfaction statement to your local recorder’s office – or, in some cases, the registrar of deeds – for inclusion in the public records. But just in case, make sure the original document is returned to you, along with the filing date and time stamped (or otherwise noted) on the form.
Once you are sure the loan is totally satisfied, go ahead and celebrate. But title professionals suggest using a copy of your mortgage, not the original document.
“Never, ever destroy any of the documents associated with buying or selling a house,” one executive advised me years ago. “If you want to burn something, burn copies. It will make you feel just as good.”
A word of caution: If you are intent on observing the moment with a celebratory fire, hold the event outside, not inside. History is replete with stories of well-intentioned people who burned their houses to the ground right along with their mortgages. At the very least, if it has to be done indoors, burn the papers in your fireplace.
Next, the question becomes: What are you going to do with your extra cash now that you don’t have a house payment? You could splurge on a vacation, a new car, maybe even that new kitchen you’ve been hankering for.
Realize, though, that you’re still responsible for your taxes and insurance. You’ve been paying for them every month, right along with the interest and principal on your loan, so why not continue making monthly payments – at least enough to cover your continuing bills – to yourself? That way, when the fees come due, you’ll have enough set aside to pay them.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
