Paying Off Your Rental Property is Easy as 1, 2, 3
I have been waiting for this moment for the last 3 years. I ran the numbers and it said if everything happens perfectly the Even Steven household would pay off our rental home in Florida. My journey started off with nothing but personal debt; you know car loans, credit cards, and student loans. Then you start a blog, pay attention to all of your money, and decide you hate debt like you hate that a**hole who is on his/her phone while driving and cutting you off all at the same time. I mentioned it a few times along the way but I think it’s important to mention again. The whole time I was personally yelling at the a**hole cutting me off while driving aka my debt, Mrs. Even Steven and our Rental Income was paying down our Florida rental property. I talked about it here and Coach Carson summed it up quite well by commenting:
“Your plan seems like a debt snowball where you plow back a bunch of money into one debt at a time, and then keep making the cash-flow-snowball bigger and bigger as you get them paid off.”
In our quest to pay off our rental mortgage we have had bumps along the road in our rental and landlord experience. Here are just a few highlights:
- We paid over $10,000 in taxes the first year we were married
- Our tenants included a custom jeweler for rappers, nurse who found her long lost drug addicted sister, and great tenant turned nightmare, and a man of God
- A very demanding HOA including possible fines for lawn care, painting a fence, cleaning a roof, and leaving our garbage/recycling out to long
- A near disaster as the perfect tenant turned ugly as repairs and replacements pushed our pay off back several months
It’s as easy as 1, 2, 3 could be the reason you are reading my article, let’s break that down. 1 is pay a bunch of money, 2 is get crazy tenants and an overbearing HOA, and 3 is spend money on repairs. I say all of this to remind everyone that getting into real estate doesn’t come along with a few lessons in humility, business, and entrepreneurship. Personally, I wouldn’t change the experience we have gone through. The process has made us more resilient, tougher, and shown our true focus for a large goal. That’s where we are today, ready to reach our goal. We are going to pay the whole f***ing thing off in just a matter of days. They say cursing emphasizes the point and that’s what I’m trying to do; I mean swear words are succinctly emotional and evocative.
First you probably want to know how we got here, I know I said to read my other post that goes into this crazy detail with graphs, numbers, and a magician who pulls rabbits from the backseat of a Toyota Camry. I want to provide 3 really simple steps that got us here, follow these and you will kick a**, no guarantees, but you people are smart. Remember this is for entertainment purposes only anyways.
- Buy a house you can easily afford.
- Buy a house you can live in and also rent out to other people
- Take your money plus the rent money from other people and pay off your mortgage aggressively, like a wild bear in search of honey
That’s what he have done for the last 3 plus years, starting in April of 2013 and ending this month, December 2016. 45 months ago we owed $189,000 to Bank of America who sold the mortgage or at least the servicing to Nationstar somewhere in that time frame. Today, we have a payoff letter in our hands and by the end of the month, we need to pay $7,235.50 to be paid in full. That may sound like a lot of money, but just remember we have 3 different rent payments to help pay off Mr. Mortgage.
How to Pay off Your Mortgage, Like a Top Dog
Raise your hand if you pay off mortgages all the damn time. Wait, there’s not a ton of us paying off mortgages! Let’s walk through the process I have gone through. I’ll do my best to talk to you like you are 5 years old or hold your hand through the process, because this is what I would want someone to do for me.
Step 1-Get a Payoff Quote
Each month you will receive a statement from your mortgage company telling you the balance and how much you owe for that particular month. What’s pretty interesting to me is that’s more of a rough estimate than the exact amount of the total you owe your mortgage company. The way to get this exact amount needed to pay off your mortgage is “call this guy I know”. This my friend is FALSE. In our case we logged online and requested a payoff quote. We had 3 choices on how to receive the payoff quote: website, fax, or mail. All of which we would receive in 1 business day. Mrs. Even Steven years ago purchased the home with an FHA loan and apparently they have a specific set of rules on how they calculate the mortgage and the interest. Here’s the wording I received when I requested the payoff letter.
This payoff quote will be valid through the end of the current month if requesting on or before the 25th of the month. Requests made on the 26th of the month or after will be valid until the end of the following month. Interest on all FHA loans is calculated on a monthly basis. This isn’t a Nationstar rule, that’s how all FHA loans are originated per FHA guidelines. For that reason, we need to receive your payoff monies by the first of the month, or we will charge another month’s interest. When you talk to your title company about scheduling your closing, please keep this in mind.
The payoff let came to our online log in with Nationstar the next business day. If I’m able to black out or hide some details I’ll make sure to show you what one looks like.
The big takeaways for me included:
- Payoff amount plus interest for the month to be paid by the end of the month
- Where and how to pay off my mortgage
Step 2-Payment Instructions
Maybe if you have a local or nationwide bank with a branch in your town you can just run down to them and pay off the mortgage, but everything that I’m familiar with you get to send to some place in the middle of nowhere. In our case they had some pretty specific instructions.
CASHIERS CHECKS* VIA MAIL/OVERNIGHT: Cashiers Checks* must be made payable to Nationstar Mortgage and mailed to: Nationstar Mortgage LLC ATTN: Account Services 8950 Cypress Waters Boulevard Coppell, TX 75019 *Customer Name, Loan Number, and Property Address should be provided on all cashier’s checks and correspondence
Of course you can always send the payoff via wire transfer, which has a fee associated with the transfer, but then again it’s very possible your cashier’s check and cost to ship will run you a few dollars as well. Here’s a list of wire transfers cost from Nerd Wallet to help you out….and me. Since my bank charges $30 for an outgoing domestic wire transfer and cashier’s checks are free, stamps/certified mail and an envelope will cost me less than a $5.00, I’ll most likely be sending mine via mail, especially because I am not saving any money in interest if they receive it today or a week from now.
I thought the payoff letter brought some interesting points to remember when paying off your mortgage, here’s what caught my eye.
- Continue to make scheduled payments. I know that seems really simple, but it would be really silly to miss your scheduled payment and have a fee for doing so. Then find out you really didn’t pay off your mortgage, I think I’m supposed to say
SMH, PTF, or Epic fail…….I will not
- PAYOFF FUNDS MUST BE REMITTED VIA WIRE TRANSFER OR CASHIER’S CHECK ONLY. So what do they have against Bitcoin or a personal check, what don’t you think I’m trustworthy!
Step 3-Celebrate……..and Wait
So what do you do when you pay off your mortgage? Celebrate, of course!
— Claudia (@twocuphouse) November 20, 2016
Since the Even Steven Money household has not officially received that declaration of achievement, I can only share what I think will happen.
I will make the payment, and then wait because I doubt the bank/mortgage company will be in any hurry to return any money or documentation. Here is the message I received on my pay-off letter.
Upon processing of payment in full, and within State specified guidelines, the necessary documents will be forwarded to the Trustee and/or County Recorder’s Office to release our lien. When applicable, and as mandated by state guidelines, any over-payment or remaining escrow funds will be disbursed off the loan no more than 20 business days after the payoff has occurred and will subsequently be mailed thereafter.
So I have to wait a month to receive my escrow money back, good to know. Here are a couple other things I will be looking to do in the month(s) ahead.
- Wait for the escrow, 20 business days is long in my humble opinion
- Make sure all of your tax statements and insurance are going to you instead of the mortgage company
- Record the clearing of the lien in your local tax office (seriously I need to figure all of this fun stuff out) and it sounds like your insurance
- If you are currently enrolled in an E-Pay/Direct Pay/ACH Payment Program, make sure to discontinue that service in an effort to avoid any unnecessary debits against your bank account.
What’s Next for Even Steven Money
Paying off our mortgage will be a major financial milestone and goal many months and even years in the making that is being reached this month. Part of my Early Retirement Blueprint is to “Have a Major Investment That Will be Your Catalyst” which has been our rental real estate and without a mortgage payment is beginning to really shape our plans. Starting in 2017 this will produce a nice sized cash flow; this will begin a serious discussion on what is next in our financial and personal lives. We have certainly talked about another part of the Early Retirement Blueprint, “Have a Secondary Investment(s) That Will Bring Passive Income”. We have also talked about other scenarios involving work, life, and family. I’m hoping to share more about our discussions and decisions coming in 2017 and wrapping up all of our financials in 2016, should be pretty easy this year since I have been using Personal Capital to track all of my income, expenses, and investments.