Paying Off a Wells Fargo Mortgage Loan

wells-fargo We’ve been with Wells Fargo for years and have closed nearly a dozen loans with them. Our rental property is the first loan we’ve paid off straight from our checking account, as opposed to at the closing table when we refinanced a property or moved to a new one.

Where’d we get the cash? We refinanced our primary residence and rolled both the rental and primary loans into one.

This netted us a cashier’s check for the amount we needed to cover the rental property mortgage, which we deposited into our checking account with the intention of writing a check to Wells Fargo. Here’s how the payoff worked…

Starting at Wells Fargo Online…

We’ve been using Wells Fargo’s online mortgage reporting system for a while to keep our Quicken Personal Finance Software up-to-date with the latest loan balances (I’m a bit of a finance junky on the side).

From their online interface, we requested a payoff quote (which involved clicking a link). All you need to generate the quote is an expected payoff date. You can print the quote on the site and they also mail a copy to the address on file.

To payoff the loan, just return the payoff quote stub with a certified check by the due date you specified. (Note: the lender must receive the funds on or before your payoff date).

Why PayOff Quotes Are More Than the Loan Balance

Payoff quotes are usually higher than the balance on the loan. Here’s why:

Reason #1: Accrued Interest. Each month when you pay your loan, you are actually paying the interest for the prior month. For instance, if you pay on the 5th of every month, you’ll be paying for the interest accrued from the 1st – 31st of the prior month. When you payoff the loan, you must pay the interest for the number of days in the month that the loan is outstanding.

Reason #2: Recording Fees. Even though you can payoff the loan completely, it won’t do you much good unless the lien release is recorded with the county or city where your house is located. The fee is collected by the lender to be paid to the jurisdiction and is usually around $25-50.

Reason #3: Accrued PMI. Private Mortgage Insurance accrues just like interest. If you have a high LTV and pay mortgage insurance, you’ll also have to pay the prorated amount of the PMI.

Reason #4: Negative Escrow Balances. If your property taxes or hazard insurance spiked upwards, it’s possible to be in a negative escrow situation. To payoff the loan, you’ll have to bring these balances to $0.

Picking a Payoff Date

The best way to send a payoff payment is via overnight delivery (FedEx or UPS). Select a payoff date that is 2-3 days past the day you’re sending the overnight package. (E.g., if you send the overnight package on the 5th, select the 7th or 8th as a payoff date). Don’t worry, if a lender receives your payoff early, they’re required to refund you any overpayment.

What About Extra Escrow?

Mortgage companies return positive escrow balances to a borrower 7-60 days after the payoff is received and processed. You usually can’t deduct these balances from the payoff amount. That said, Wells Fargo notes in their documentation that they can use your escrow funds to make up a deficiency in your payoff amount if necessary.

Paying Off a Mortgage Is a Good Feeling

Even though we refinanced the bulk of our rental property mortgage into our primary home, it’s certainly a good feeling to have one property paid for. We’ll enjoy that for a few days, and then stay focused on getting this property paid off too