I've made up my mind to pay off what's left of my (U.S.) mortgage, and it's within my means to do so without any peril or serious disruption to the rest of my financial plans. I know about the pluses and minuses and that's not what I'm asking about. I want that monthly payment off the list.
Congrats in advance. I paid mine off a few years before I retired. One advantage I predicted that turned out to be true in my case that most people don't mention: Without the need to make a large mortgage payment, I can keep my income low. Keeping my income low opens up the doors to lots of tax credits and deductions for low income people, such as ACA tax credits, cost sharing reductions, financial aid, and, of course, a low tax bracket.
What I want to know, from anyone who's done it, is what are the logistics and what I should expect. Mortgage company website is useless. I will be calling them to see what more they can tell me.
Yes, call them, as practices probably differ a bit from company to company and mortgage to mortgage.
What I did the last few years I had mine was just to pay large chunks against principal. I believe there was a way for me to do this, but almost all mortgage companies will accept a check with a memo field saying "against principal" or with a short note to that effect.
When my balance got low enough, I didn't actually bother with the official payoff process. What I did was just overpay the remaining principal by about $100. The mortgage company received the payment, applied it to my balance, and then their computers noticed that I had a negative balance of $98.43 or whatever on my mortgage. They considered it paid off and sent me a refund check for the $98.43 a couple of weeks later.
If I just send them an extra large check, do I probably have to do anything about it to get them to apply the excess to the principal rather than applying it to the next month? Should I advise my bank that an especially large payment is imminent? Should I pay somehow other than by sending a check or electronic payment?
Usually without instructions, the mortgage company will by default assume that you're just making your next X monthly payments, which is not what you want. You need to specify, as mentioned above, to apply it to principal, either in the memo field of the check, in the note you include, or via their web payment system if they have one.
You don't have to notify them at all. They're used to handling large payments and have seen it before.
You can pay however you want. I did electronic payments because they were faster and less hassle than a check. But then I knew they would apply the excess to principal and not to my next payment.
Why do I have to call them about payoff information, and why is the amount different than the remaining principal on the loan? If I pay them all but the last $500, do they send payoff information automatically?
Usually when they calculate the payoff amount, it's the remaining principal plus interest on the remaining principal for the next 10 or 20 or 30 days, which gives you time to get the payment to them and for them to process and apply it to your account. I think they'll even tell you that the payoff amount is good for X days.
They do not send payoff information automatically as far as I know. If you paid all but the last $500, they'd just expect you to make your monthly payment until the balance went to or below zero.
Is there anything else to do or consider doing before paying off, or cutting loose the mortgage company?
Before, not really. Immediately after:
1. Make sure your mortgage holder considers it paid off.
2. Turn off your monthly payment push.
3. Notify your homeowner's insurance and your property tax folks and ask them to send you the bill from now on.
4. Make sure the mortgage lien is removed from your property title. You can check with your local county recorder's office a month or two later to make sure it's done. Sometimes the mortgage company wants you to pay an extra $50 or so for them to process this paperwork, although frankly they should do it just as part of the regular course of business.
5. Review your home insurance deductible and coverage amounts and make sure you still want what you have.
What other follow-through do I need to do? Tell my insurance agent and my tax preparer, that I know of. Is there title stuff that happens at this stage, too? Anything else?
See the list above. You don't really need to tell your tax preparer. You'll get one last mortgage interest statement, and it probably wont be deductible unless you have other Schedule A items; of course give that to your tax preparer next year, but s/he will just copy that number over into their tax program; there is nothing special about a payoff tax-wise.
What should I expect this to do to my credit score, both in the short and the longer term? I pay credit cards in full and intend never to need another car loan, unless there's some benefit to it. I might someday buy a rental property with a mortgage to avoid touching other investments or open another cc for the promos. Of course, credit scores sometimes get checked in relation to insurance, employment, etc., too.
TIA for any insight or suggestions, and for links to relevant threads I might have missed when I searched.
Your mortgage will stay on your credit report for several more years after your last payment - seven or ten IIRC. It should of course update to a zero balance and showed as paid off. I don't know what paying off a mortage does to your credit score for sure, but I would expect it to go up, because you have shown responsibility in paying it off, and at the same income you have more capacity to pay any credit card or other debts, so you should be a better credit risk.
I just checked and my credit report via Credit Karma still shows three mortgages, the last payments of which were in 2011, 2012, and 2014. So I think it is 10 years after the last payment. (I didn't actually have three mortgages; this was the result of refinancing my mortgage several times as rates dropped in that time frame enough to make it worth it.)
I paid off my mortgage about six years ago, have been FIREd for four, and my Credit Karma scores are 836/831.