You Should Know This – Paying Off Your Mortgage

Every homeowners dream is to be able to pay off their mortgage and live in a free and clear home. Many homeowners do not even think about paying off their home loans and think it is almost next to impossible for anyone to have a home without a mortgage. However, there are folks who do have goals and strive very hard to reach that goal of paying off their mortgage. Those homeowners who accomplish the hard task of having their mortgage paid off do deserve the bragging rights and it is an impressive goal and accomplishment. The very few and proud homeowners who do pay off their mortgage loans need to make sure that after making the final mortgage payment of their home, that the lien on the property has been released off the title to the property by their mortgage lender so in the event if they need to sell their property at any given time, there are not going to be any red tape. All FHA Loan programs require escrows for property taxes and homeowner’s insurance so once the mortgage loan has been paid off, the escrow requirements for your property taxes and insurance will be the sole responsibility of the homeowner.

Things You Must Know About Paying Off Your Mortgage Prior to Final Payoff

As you are nearing the finish line of paying off your mortgage, there are several things you must know about paying off your mortgage prior to your final mortgage payment due. One of the things you must do is to ask for a final payoff figure from your mortgage lender about 45 to 60 days before you last and final payment of your mortgage. Homeowners need to understand that mortgage borrowers pay their mortgage loan payments in arrears and because they are paying in arrears, homeowners may actually owe more mortgage balance then they think they owe. For example, if a homeowner has a mortgage payment that is due this month and they pay their payment now for this month, this month’s payment is covering the previous month’s principal and interest payment. The interest clock is always ticking, day or night. Interest is added on every minute of every day. If you are one of those homeowners that have been paying extra housing payments than the minimum monthly due, you will be surprised when it comes out that you owe substantially less than what you have thought you owe on it.

How Do You Pay Off Your Mortgage?

Homeowners with mortgages have a mortgage loan servicer who service their mortgage loan. The loan servicer’s responsibility and scope of their work is to make sure that the borrower’s accounting records, including escrows, are accurate and monthly statements gets sent out on time and record the payments made by borrowers are logged in correctly. When a homeowner asks for a payoff on a mortgage loan, the mortgage loan servicer is the agent processing the payoff statement to the homeowner or to the mortgage lender who is requesting a payoff on behalf of the borrower. Upon a payoff request by the borrower, the loan servicer needs to prepare the correct payoff figures and make sure that the payoff letter gets sent out to the borrower or borrower’s power of attorney within seven days of the payoff request. The loan servicer will state the date that the loan payoff will be good until and if that date passes, there will be additional daily mortgage interest that will accrue. There are fees and costs in paying off a mortgage. Besides the final principal and interest payment, borrowers will need to pay recording fees to the county recorder’s office for releasing the mortgage lien for the title of the property. The mortgage lender may also have additional fees and costs such as processing fees, wire transfer fees, unpaid fees, as well as late fees if applicable

Release of Escrows When You Pay Off Your Mortgage

There are other tasks required by the mortgage loan servicer when you pay off your mortgage. Most borrowers will have an escrow account with their loan servicing company. When you pay off your mortgage, the escrow account also needs to be closed out. One of the roles of the mortgage loan servicer is to escrow your property taxes and homeowner’s insurance and pay them when it was due. Since the loan servicer will no longer be servicing your mortgage loan, they will need to close out your escrow account and refund you any remaining funds that is held in your escrow account within 20 days of your loan payoff and need to zero out and close your escrow account. Make sure that you get confirmation of the closing out of your escrow account and check in with your homeowner’s insurance company and the county’s property tax division to make sure that they have the proper address where to mail you future insurance bills and property tax bills that is due. Get the proper due dates so you are not late and are not assessed a late payment fee or have the risk of your home being uninsured. Automatic online payment setups is a good way of making sure that your bills will get paid timely but make sure that you have sufficient funds in your bank accounts.

When Do You Get Free and Clear Title to Your Home

Many homeowners think that just because the loan servicer shows a statement with a zero balance on your mortgage that you own your home free and clear. This is not the case. You will only have free and clear title to your home when the county recorder’s office records the release request. This can take from a few days to several weeks. You officially own your home free and clear when you physically get a copy of the release that shows the recorded date as well as the identification doc number from the county recorder’s office. There are several ways that you can get possession of this release. You can request it to be mailed to you or you may have an option to pick it up at the county’s recorder’s office.

When you contact your homeowner’s insurance company to tell them that you have paid off your mortgage, make sure you tell the insurance company that the loan servicer is no longer the additional insured and have them remove their name off your homeowner’s insurance policy. Your homeowner’s insurance company may ask for a copy of the recorded release request as well as a copy of your deed.

Something You Should Know About Consumer Credit VS Capital Credit

There’s a BIG difference between CONSUMER CREDIT and CAPITAL CREDIT. And understanding this difference will help readers understand why American income has become so inequitably distributed, especially over the past four decades, and why the wealth gap between the few and the many, threatens to undermine American democracy.

Consumer credit on one hand, is easy to get. Fill out a few online forms and unless you have some real financial problems you’ll receive your very own, personalized, plastic credit card along with all the accompanying literature (lots of fine print) within days.

With consumer credit in hand you can buy anything from gas at the pump, to beer at the ballpark, or a college education (student loans sound familiar to anyone?). A consumer credit card company wants you to buy all kinds of things on credit (often at ridiculously high interest rates – formerly called usury), to pay later, while piling up a mountain of debt that will allow the lending institution to make you work for the rest of your days in order to pay off your debt to them.

In Contrast – Capital Credit…
On the other hand, capital credit allows you to purchase wealth producing capital assets (i.e. land, machinery, buildings, corporate stock), to pay back the loan at a reasonable rate until you own the asset outright, and are reaping the full financial benefits of owning wealth producing capital. Done right, the loan is paid back out of FUTURE EARNINGS (i.e. dividends) instead of the borrower’s own pocket.

Capital credit however, is much harder to get (try buying a house sometime) than consumer credit. Generally speaking, borrowers must be able to prove they don’t need the money (meaning they have ample collateral with which to back the loan) before the lending institution agrees to anything. The result is that most wealth producing capital assets that yield lucrative dividends to their owners are accessible ONLY to a small percentage of people – the 1% to 5% who can prove they don’t need the money.

Almost everyone else is effectively left out in the cold when it comes to accessing capital credit and owning wealth producing capital assets. This is the basic reason for the wealth gap that’s transformed America’s democracy into a 21st century American oligarchy.

Enter Kelso and Adler
Enter a gent named Louis O Kelso, who back in 1958 published a book entitled “The Capitalist Manifesto,” in which he (and co-author Mortimer Adler) suggested that every American citizen should have access to capital credit with which to purchase wealth producing capital assets at reasonable interest rates and in the process actively participate in (instead of being left out of) America’s highly productive free market economy.

Such a strategy according to Kelso and Adler, would democratize a free market economy. Such a strategy would maintain the private ownership essence of the free market while preventing the monopolistic tendencies that have historically undermined political democracy in laissez faire capitalist economies. In other words, it would save the free market from its own historical tendencies to self destruct.

By democratizing the free market (while creating lots of demand via a second “investment income” for every citizen*) and systematically reducing the malignant wealth gap, Kelso and Adler predicted an economic expansion even larger than the one that followed in the wake of Abraham Lincoln’s Homestead act of 1863 which gave every American citizen 160 acres of land (one kind of wealth producing capital asset), if they were willing to take care of it. But where land is finite, business opportunities and corporations (as well as the economic possibilities) are infinite.

Oligarchs Successfully Marginalized Kelso/Adler
The oligarchs however have successfully kept a lid on Kelso and Adler’s revolutionary ideas and to this day most of the public actually thinks there are ONLY 2 choices when it comes to economics. There is the historically right leaning, free market, laissez- faire capitalist approach of the Republicans. And there is the historically left leaning, labor union favoring approach of the Democrats.

The right pushes rugged individualism and personal responsibility while the left pushes enlightened self interest which recognizes that we’re all in this together. According to conventional wisdom, the political pendulum swings between these two poles and in the process the Kelso/Adler prescription has been effectively ignored by the “free press.”

Enter the Capital Homesteading Act
But that does not mean “ownership economics” are dead and gone. On the contrary, over the past half century thousands of employee owned companies (ESOPS) and worker owned co-ops have sprung up around the nation. When done for the right reasons (not to bail out a failing airline) these examples democratize the conventionally despotic corporate plantation.

Professor Rick Wolfe, Dr. Guy Alperovitz, and Dr. Ted Howard are unabashed, vocal proponents of worker owned co-ops based on the Spanish Mandragon model. Off shoots of this can be found in places like Cleveland, Ohio (the Evergreen Co-op) and Jackson Mississippi (championed by now deceased Mayor Chokwe Lamumba).**

And a resilient band of renegades known as the Center for Economic and Social Justice, led by Dr. Norm Kurland has developed and introduced The Capital Homestead Act which exchanges land for capital assets, and in the process gives every American citizen access to capital credit (per Adler/Kelso). The Capital Homestead Act is built on a foundation of PRIVATE OWNERSHIP which those on the right will applaud. Yet it also accounts for the fact that WE’RE ALL IN THIS TOGETHER, which those on the left will applaud. In other words the Capital Homestead Act takes the best of both sides and merges them into a 21st century idea whose time has come.

Capital Credit: an Idea Whose Time Has Come
In any case, the time has arrived for an alternative solution because the arguments on the conventional right and those on the conventional left have fallen short of the mark when it comes to empowering individual citizens, recognizing that we really are all in this together, and when it comes to democratizing a free market economy. Ownership economics is the key to the future for anyone who really wants a political democracy.

*The 2nd income is generated from distributed dividends NOT from taking a 2nd job.

** Rutgers University also offers its annual Louis O Kelso Fellowship which plants academicians around the nation with some background in this unique line of thinking.

Actually people around the world are interested in the concept of Ownership Economics as exemplified by the Global Justice Movement and through presentations by internationally renowned scholars such as Professor Stefano Zamagni.