9 times out of 10, you’d have been fine just sending in money. The banks don’t intend to do things wrong. Mistakes do happen, though, and you’re best off making sure of it.
When I paid off my car loan early, the company forgot to release their lien on our vehicle. My wife and I noticed that last year when we renewed the tabs - eight years after the loan was paid off. It took us a long time to even find the right company and three attempts to get them to release the lien. Fortunately, we were proactive.
This is all true, 9 times out of ten everything works out just fine and you’d never know the difference, but that one time out of those ten will be enough for you to just give up and burn the house down when you go to sell or remortgage it in 5 or 10 or 20 years because everyone just shrugs and shakes their heads. I’m a professional at this with 13 years experience in the field and I struggle to help people reconcile this stuff on a daily basis. What could have been done with a phone call or two and $40 out of pocket right away turns into paying an attorney a few hundred dollars or more to threaten people into action later on down the line.
And paying out of pocket ups the chances of an “oops” into the stratosphere because there aren’t other companies with a vested interest in seeing everything done correctly at that point.
Getting everything closed up is the reason you don’t skip out on the last $6. You don’t spend 15 to 30 years paying for a house that you can’t sell or refinance because the bank won’t release the lien.
I recently paid off a mortgage, and kept the property, as opposed to paying it off as part of a sale. I went to the mortgage holders website, Chase in this case, and clicked the thing for “send me a payoff statement”. It was just a legal sized piece of paper with my balance, the filing fee, and instructions.
I followed the instructions, which consisted of: send a certified check in the right amount to a certain address and include a copy of this letter, send a written request to stop automatic deductions from my checking account. I’ve since received several letters back from Chase. The first one said “this is your temporary proof you’ve paid off the mortgage until we get everything filed with the county and then you’ll get your final proof,” and then one that said “thanks for contacting automatic payments, but your payments have already been canceled because the loan is paid off.” Just following instructions…
I don’t actually have any beef with Chase, but I can certainly understand the desire to mess with a bank. On the other hand, I also have the desire to be rid of the bank’s interest in my property, and I’d like that to go as smoothly and quickly as possible. I even sent my payoff check certified mail, so I could prove they’d received it, if necessary. Between sending the check and getting the payoff confirmation I was a bit nervous, because it took about 3 weeks. I kept thinking I should’ve paid the $30 to wire the money.
The only outstanding issue is that when the loan was paid off they immediately closed my online account, so I have no way to download my last couple of statements.
I believe what they do when you owe considerable less than the property is worth varies by state. While visiting my sister in Idaho, I saw an ad in the paper for a house for sale for some ridiculously small, but specific, amount (something like $5326.47). I was told that foreclosures are sold for the exact amount required to cover the debt. I know in California, foreclosures are often sold at auction, but I think the bank keeps all the proceeds but also cannot come after additional assets if the sale does not cover the debt.