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Adjustable rate mortgage
From Wikipedia, the free encyclopedia
An adjustable rate mortgage or variable rate mortgage is a loan secured on a property (house) whose interest rate and so monthly repayment vary over time. Other forms of mortgage loan include interest only mortgage, fixed rate mortgage, Negative amortization mortgage, discounted rate mortgage and balloon payment mortgage. Adjustable rates transfer part of the interest rate risk from the lender to the borrower. They can be used where unpredictable interest rates make fixed rate loans difficult to obtain. The borrower benefits if the interest rate falls and loses out if interest rates rise.
Variable rate mortgages are the most common form of loan for house purchase in the United Kingdom but are unpopular in some other countries. Variable rate mortgages are very common in Australia and New Zealand. For those who plan to move within a relatively short period of time (three to seven years), they are attractive because they often include a lower, fixed rate of interest for the first three, five, or seven years of the loan, after which the interest rate fluctuates.
Adjustable rate mortgages, like other types of mortgage, may offer the ability to repay principal (or capital) early without penalty. Early payments of part of the principal will reduce the total cost of the loan (total interest paid), and will shorten the amount of time needed to pay off the loan. Early payoff of the entire loan amount (refinancing) is often done when interest rates drop significantly.
Adjustable rate mortgages are sometimes sold to unsophisticated consumers who are unlikely to be able to repay the loan should interest rates rise, which they often do. In the United States, extreme cases are characterized by the Consumer Federation of America as predatory loans. Protections against interest rate rises include (a) a possible initial period with a fixed rate (which gives the borrower a chance to increase his/her annual earnings before payments rise); (b) a maximum (cap) that interest rates can rise in any year (if there is a cap, it must be specified in the loan document); and (c) a maximum (cap) that interest rates can rise over the life of the mortage (this also must be specified in the loan document).
The Hybrid ARM
What is the difference between a hybrid and a traditional ARM
THE dominant loan product in today's marketplace. They are often packaged as the 5/1 ARM or the 2/28 ARM (most popular products). The loan is a "Hybrid" because a true ARM adjusts for the same periods for the life of the loan, ie. a 6 Month ARM is fixed for the first six months and adjusts every six months afterwards. The 2/28 "Hybrid ARM" is a 6 month ARM that the borrower has purchased a "Rate Lock" or introductory rate for the first 2 years (this is also done in 3,5,7 year fixed periods), and then the loan becomes a 6 month ARM thereafter, rather than a loan that does only adjust every 2 years.
The benefits
This loan product has actually lowered the costs of borrowing in the early years of loans, but certainly is a source of continuing refinance business to the Mortgage industry. They let borrowers take advantage of special pricing, by saving money on payments a) when the borrower's salary is rising such as for young professionals or b) when the borrower knows they are going to move up quickly from one home to another.
The risks
If a borrower is inconsistent in their on time payment history, afflicted by tragedy which causes a credit problem, or keeps insufficient funds in reserve (the payment savings from the lower rate for example), as referenced above, the rates in Hybrid ARMs will certainly rise, and with insufficient credit and income, the borrower may be forced to trade equity for time, and in some markets, not as advantageously as today.
Terminology
- Fully Indexed Rate - The price of the ARM as calculated by adding Index + Margin = Fully Indexed Rate. This is the interest rate your loan would be at without a Start Rate (the introductory special rate for the initial fixed period). This means, your loan would be higher today if it was adjusting, typically, 1-3% higher than the introductory rate. Calculating this is IMPORTANT for ARM buyers, since it helps you predict the future interest rate of your loan.
- Margin - This refers to the banks profit margin above the value of the financial index. The bank seeks to make a profit above the costs of inflation. The index is a measure of the cost of funds as measured by inflation.
- Start Rate - The introductory rate provided to purchasers of ARM loans for the initial fixed interest period. The difference between the "Start Rate" of an ARM and the rate of a fixed terms loan is that the "Start Rate".
- Period - This is the frequency of adjustments, the longer the rate remains fixed, the better the loan is for the borrower. Typically, the shorter this is the lower the rate, since there are more opportunities to adjust upwards.
- Floor - A clause that sets the minimum rate for the interest rate of an ARM loan. Most loans come with a Start Rate = Floor feature, but this is primarily for Non-Conforming (aka Sub-Prime or Program Lending) loan products. This prevents an ARM loan from ever adjusting lower. An "A Paper" loan typically has either no Floor or 2% below start.
- Payment Shock - Industry term to describe the severe (unexpected or planned for by borrower) upward movement of mortgage loan interest rates and its effect on borrowers. Sadly, for those that do not read this wiki entry or who do read it but cannot understand its contents, they may experience it, or spend too much of their incomes to borrow on fixed terms only. See Caps below
- Cap - Any clause that sets a maximum change for the interest rate of an ARM loan.
Understanding Caps
- "The Caps" - In industry slang, there you could ask for the Caps of a loan, and if your broker or loan officer is intelligent enough to read the rate sheets they are quoting from, it is ALWAYS displayed and available. This is basic stuff, the ABC's of mortgage lending, if you're working with someone that can't or won't explain this to you, go elsewhere.
- What's better? - The lower these numbers are, the better for you, especially, the first number.
Examples: 2/2/5 ; 5/2/5 ; 2/1/6 ; 3/1/6 ; 2/4 ; 1/1/5 .
The first number is the initial change cap, the second is the periodic cap, the last is the life cap. When only two values are given, this always means the initial change cap and periodic cap are the same. The longer the initial fixed period, typically, the higher the caps are given.
- Initial Change Cap - ARM loans have a specified maximum first adjustment that is typically higher than allowed on subsequent changes.
- Periodic Change Cap - The maximum interest rate adjustment for every subsequent periodic adjustment.
- Life Cap (Ceiling) - The maximum upwards adjustment of an ARM loan. Typically on first mortgages no more than 6%.
Crucial Information About Caps
Loan caps provide payment protection against payment shock. Most First Mortgage loans have a 5% or 6% Life Cap. Higher risk products, such as Monthly Adjustable loans with Negative amortization and Home Equity Lines of Credit aka HELOC have different ways of structuring the Cap than a typical First Lien Mortgage.
Most First Mortgage loans have a 5% or 6% Life Cap. If the adjustment period is 6 months or 1 year ( the two most common periods on the market), then it takes anywhere from 2-4 maxiumum upward adjustments to reach this cap
See the complete article for the type of ARM that NegAM loans are by nature. Most of them are Monthly Adjustable ARMs and the life cap or ceiling is simply expressed as a maximum rate, usually 9.95% or 10.95% these days. Beware though, some of these loans have 14-16% ceilings, you have to ask . . . . The fully indexed rate is always listed on the statement, but borrowers are shielded from the full effect of rate increases by the minimum payment, until the loan is recast
- Home Equity Lines of Credit HELOC
Since HELOCs are intended by banks to primarily sit in second lien position, they normally are only capped by the maximum interest rate allowed by law in the state they are issued in! In Florida, for example, this is 18% ! Wow!
Sadly, most people do not take the time to learn about their ARM product, and some people even take these loans out as their First Lien loan, putting their house in jeopardy of foreclosure if there is an inflationary market.
External links
5/1 ARM is an adjustable-rate mortgage (ARM) that has an initial interest rate for five years, and thereafter has an adjustment interval of one year.
HELOC
From Wikipedia, the free encyclopedia
HELOC is an abbreviation of Home Equity Line of Credit. This refers to a loan in which the lender agrees to lend a maximum amount within an agreed period. This differs from a conventional home equity loan in that the borrower is not advanced the entire sum up front, but uses the line of credit to borrow sums that total no more than the amount.
A HELOC in many ways is similar to a credit card. At closing you are assigned a specified credit limit that you can borrow up to - not a check. During a "draw period" (typically 5 to 25 years), HELOC funds can be borrowed "on demand" and you pay back only what you use plus interest. Depending on how much you use the HELOC, you will have a minimum monthly payment requirement (often "interest only"); beyond the minimum, it is up to you how much to pay and when to pay. At the end of the draw period, you will have to pay back the full principal amount borrowed either in a lump-sum balloon payment or according to a loan amortization schedule.
Another important difference from a conventional loan: the interest rate on a HELOC is variable based on an index such as prime rate. This means that the interest rate can - and almost certainly will - change over time.
HELOC loans have become very popular in the United States in recent years, in part because interest paid is typically (depending on specific circumstances) deductible under federal and many state income tax laws. This effectively reduces the cost of borrowing funds. Another reason for the popularity of HELOCs is the flexibility not found in most other loans - both in terms of borrowing "on demand" and repaying on a schedule determined by the borrower.
It must always be kept in mind that the underlying collateral of a home equity line of credit (HELOC) is the home. This means that failure to repay the loan or meet loan requirements can result in foreclosure.
PMI I want to start a little info thread on PMI, to help people make better loan decisions. This is inspired by a recent thread where the borrower was unaware of the PMI amount until closing.
I'll start with the basics.
What is PMI? PMI is an acronym for Private Mortgage Insurance. Lenders require PMI for mortgages where the borrower puts down less than 20%. Simplified, this insures the lender will recoup their full investment if the borrower defaults. PMI provides NO benifit to the borrower. The lender makes the borrower pay for it, as a condition of giving them the loan.
How To Calculate PMI
PMI is calculated as a stairstep function. That is to say, the percentage you pay increments in steps, for every 5% of the selling price that is put down. i.e. You pay the same PMI rate for 10% down, as you do for 14.999% down. Here is the breakdown:
Base-To-Loan % 30 yr 15 yr
95.01% to 97% .90 .79
90.01% to 95% .78 .26
85.01% to 90% .52 .23
85% to 80.01% .32 .19
Here is an example using the amounts from the above mentioned thread.
$290,000 house with $14,500 down(5%) 30 yr loan
principal: $290k - $14.5k down = $275.5k (selling price - down payment)
Base to loan %: $275.5k/$290k = 85% (principal / selling price)
PMI Rate: Use above table, for 30yr loan at 85% base to loan %, the PMI rate is .78%
PMI Premium: $275.5k * .0078 = $2148.90 per year, or $2148.90/12 = $179.08 per month.
This Is How They Get You
Lenders will calculate the PMI premium when you get the loan, and it will stay the same until you get to 75% LTV (I think). So, even though your principal amount will be less several years down the road, you will still be paying PMI based off of the original principal amount.
Although you can cancel PMI once you achieve 80% LTV, the lender isn't going to do this automatically. This is pure gravy for them, and they will keep charging it as long as they can. Recently (1998 I think), new laws were put into place so that lenders must stop charging you PMI once your get to 75% LTV (5% past 80%!).
Lenders are always coming up with new ways to screw you. Now they have the PMI-less loan. So you can get a loan with 5% down, and you don't have to pay PMI. Sounds great, but they are going to charge you a higher interest rate (to the tune of 2% for one loan I saw). The alleged benifit is that the entire amount is tax detuctable, where as PMI is NOT tax detuctable. Well who cares if it is tax deductable, you are paying a buttload of extra interest for that tax deduction. Probably more than the PMI would have been. The best part about it is that your interest rate is the same for the life of the loan. So even if you pay the mortgage down to 50% LTV, you still get to pay the higher interest rate!
PMI tips and tricks
Here are a few well known tactic to keeping the PMI damages to a minimum.
Interestingly enough, second mortgages don't count towards LTV ration for calculating PMI. So you can get what is refered to as a 80/10/10 (or some variation) loan. Essentially you get a first mortgage for 80% (with no PMI), and a second mortgage for 10% (or whatever is left after your down payment).
Get your home appraised. If you are already paying PMI, your house may have appreciated above the 80% threshold. Likewise, if you have done some major home improvments. Some lenders will make you wait a year or two before they let you do this. It is best to call and ask.
And the number one way to avoid PMI...Put down 20%! If you can't afford 20% down, perhaps you are getting more home than you can afford*.
A Few Closing Remarks
Using this info, combined with other data, there is no excuse to not know almost exactly what to expect at closing. You should know exactly what your payment will be. You will know the interest rate you locked in, the loan amount, the LTV. Ask for the tax and insurance info before hand. There are numerous number games that lenders can play, to screw you over big time. The way they see it, who is going to back out of a deal at the last second because a payment is a little higher than expected.
Set up a spread sheet with all the numbers. You can play with the numbers to see how much it affects your payment to get a second mortgage, in liu of PMI, or how different interest rates affect you payment, how much more is a 15 year mortgage than a 30 year(do it, you will be supprised!).
Please add comments, questions and/or corrections. Also, it would be cool if an Excel expert could convert the above PMI table into an Excel formula, and post it.
*Of course in some markets 20% down is unreasonable, since home prices are unreasonable. So just prepare yourself for the PMI butt pirates.
A balloon payment mortgage is a mortgage that has a final payment that is much larger than a regular payment.
Borrowers get lower rates and payments for a specific period of time, which usually is anywhere from three years to 10 years. At that point, a borrower has to pay off the principal balance in a lump sum. Under certain conditions, the mortgages can be converted to fixed-rate or adjustable-rate loans. Many borrowers either sell their homes before they get to their due dates or end up refinancing their balances into new mortgages. If you plan on either selling your home, paying it off, or refinancing it before the balloon payment is due, then this type of mortgage is good deal.
Pro
Save on mortgage costs initially -- a great option if you don't plan on living in the home long.
Con
Plans sometimes change. If yours do, you will have to pay off or refinance the balance, which takes time, effort and more closing costs.
The range of documentation types runs the gamut from full documentation to no documentation. Below is listed a brief explanation of each type.
1) Full Doc (umentation): This is the most common type of mortgage
documentation. With a full doc mortgage you will normally be expected to
provide complete proof and documentation of all income sources and asset
sources. You can usually be expected to provide at a minimum; your last 2
paystubs, your last 2 years W-2 forms, your last 2-3 months bank statements
for each bank account that you have (full statements and not just the first
page), your most recent 6 months 401K and/or IRA statements. With many sub
prime lenders, you can substitute your last 12-24 months bank statements in
lieu of both pay stubs and W-2s.
2) Limited Doc: A limited (lite) doc mortgage generally will use as little as 6
months bank statements to prove income. Otherwise it is like a full doc
mortgage.
3) Stated Income/Verified Asset (SIVA): With a stated income/verified asset
mortgage you simply state what your income is, though it has to be
reasonable to the type of work. Like the full doc mortgage you will need to
verify your assets with documentation.
4) Stated Income/Stated Asset (SISA): With a stated income/stated asset
mortgage, you state both your income and what assets you have. These are
not verified.
5) No Ratio: This mortgage type has no income associated with it. While
employment information is required, the income amount is neither shown nor
disclosed. The only information that is verified with the employer is that
the borrower is employed there and for how long. Assets will normally be
verified with this mortgage type.
6) No Income No Asset (NINA): With this mortgage type, neither income nor
assets are shown. As with a no ratio mortgage, employment is verified.
7) No Documentation: A no doc mortgage is just that, there is no documentation
required to be approved. This mortgage will be strictly based on the
borrower�s credit score and depth of his/her credit history.
This is simply a brief synopsis of mortgage documentation types. Virtually all mortgages will be one of these types. Lenders may call them by different names, but they will be one of these types anyway.
Consider the APR as a number which tries to get to the real cost of the money you borrow. It takes into account how much you'll spend to get that money and treats those costs as prepaid interest. Generally the stuff in the 800 section of your Good Faith Estimate (some will disagree) as well as the prepaid interest on line 901 are what go into the calculation. Unfortunately 50 lenders will give you 50 different answers as to what is included so it's almost useless except as a general guideline. If the APR is alot higher than the rate you'll want to take a closer look at what the fees are.
It is much more important to get a Good Faith Estimate and any reputable lender, broker or loan officer will be happy to provide one (or several if you wish to look at different options).
The problem with APRs is that anyone can decide not to check the box for points or a particular fee and give you a false APR. Its as simple as that, checking and unchecking boxes with really no kind of safeguard. Same with the rates and APRs in the newspaper or many websites.
A lock-in, also called a rate-lock or rate commitment, is a lender's promise to hold a certain interest rate and points for you, usually for a specified period of time, while your loan application is processed. (Points are additional charges imposed by the lender that are usually pre-paid by the consumer at settlement but can
sometimes be financed by adding them to the mortgage amount. One point equals 1 percent of the loan amount.) Depending upon the lender, you may be able to lock in the interest rate and number of points that you will be charged when you file your application, during processing of the loan, when the loan is approved, or later.
A lock-in that is given when you apply for a loan may be useful because it's likely to take your lender several weeks or longer to prepare document and evaluate your loan application. During that time, the cost of your mortgage may change. But if your interest rate and points are locked in, you should be protected against
increases while your application is processed. This protection could affect whether you can afford the mortgage. However, a locked-in rate could also prevent you from taking advantage of price decreases, unless your lender is willing to lock in a lower rate that becomes available during this period. It is important to recognize that a lock-in is not the same
as a loan commitment, although some loan commitments may contain a lock-in. A loan commitment is the lender's promise to make you a loan in a specific amount at some future time. Generally, you will receive the lender's commitment only after your loan application has been approved. This commitment usually will state the loan terms that have been approved
(including loan amount), how long the commitment is valid, and the lender's conditions for making the loan such as receipt of a satisfactory title insurance policy protecting the lender.
get quotes. pick one you like.
give your loan officer the quote(or at least the agent' name and phone number) and they will take it from there.
at closing, there will be a charge for one years homeowners insurance policy to be paid.
also, if you escrow your pmts.... they will collect a couple of months to put in escrow for next year's policy
Closing cost
From Wikipedia, the free encyclopedia
Real property in most jurisdictions is conveyed from the seller to the buyer through a real estate contract. The point in time at which the contract is actually executed and the title to the property is conveyed to the buyer is known as the "closing". It is common for a variety of costs associated with the transaction (above and beyond the price of the property itself) to be incurred by either the buyer or the seller. These costs are typically paid at the closing, and are known as closing costs.
Examples of typical closing costs might include:
- Attorney (Lawyer) fees, paid by either or both parties, for the preparation and recording of official documents. The principals and/or lender may each be represented by their own attorney. Typically required by institutional/commercial lenders to ensure documents are prepared correctly.
- Title service cost(s), paid by either party according to the contract but by default seller may pay the majority, for title search, title insurance, and possibly other title services. In some cases the attorney may do the title search or the title service and attorney fees may be combined. Required by institutional/commercial lenders and often by the real estate contract.
- Recording fees, paid by either party, charged by a governmental entity for entering an official record of the change of ownership of the property. Required by the government for recording the deed.
- Document or Transaction Stamps or Taxes, paid by either or both parties depending on location (area of jurisdiction), charged by a governmental entity as an excise tax upon the transaction. Required by law.
- Survey fee for a survey of the lot or land and all structures on it, paid by either party, to confirm lot size and dimensions and check for encroachments. Required by institutional/commercial lenders.
- Brokerage Commission, paid by the seller to a Real Estate Broker, to compensate the Broker(s) involved in the sale for their services in marketing the property, finding a buyer, and assisting in the negotiations. Brokerage commissions are usually computed as a percentage of the sale price, and are established in a listing agreement between the seller and the listing broker. The listing broker may offer Buyer Agents a portion of their commission as an incentive to find buyers for the property. Payment is required if real estate brokerage service was used. This is often one of the largest closing costs.
- Mortgage Application Fees, paid by the buyer to the lender, to cover the costs of processing their loan application. In some cases, the buyer would pay the lender the application directly and prior to closing, while in other cases the fee is part of the buyer's closing costs payable at closing.
- Points, paid by the buyer to the lender. Points are a form of pre-paid interest, charged by the lender as an alternative to charging a higher rate of interest on the mortgage loan. One point equals one percent of the loan principal.
- Appraisal Fees, usually paid by the buyer (although occasionally by the seller through negotiation), charged by a licensed professional Appraiser. Many lenders will require that an appraisal be performed as a condition of the mortgage loan. The purpose of this appraisal is to verify that the sale price of the property (upon which the underwriting of the loan is based) is equal to or less than the fair market value of the property.
- Inspection Fees, usually paid by the buyer (although occasionally by the seller), charged by licensed home, pest, or other inspectors. Some lenders require inspections (such as termite inspection) to verify that the property is in good condition, which is necessary to assure that the property will retain the necessary collateral value to secure the mortgage loan.
- Home Warranties, paid by either the buyer or the seller. Warranties are available on resale homes insuring major household systems against repair or replacement for the buyer's initial year of ownership. Sellers will sometimes offer these warranties as a marketing strategy, or buyers can elect to purchase them at closing.
- Pre-paid Property Insurance, paid by the buyer. Lenders will typically require that a mortgaged property be insured at all times throughout the life of the mortgage, and will usually require that the first full year's property insurance premium be paid in advance by the buyer. If the buyer has not already paid the insurance company directly, this would become another closing cost payable at closing.
- Pro-rata property taxes, paid by the seller, the buyer, or both. Most (but not all) jurisdictions assess taxes on real property, which are usually payable at a specified date annually. Since all but a tiny fraction of real estate transactions close on a date other than this one specified annual date, most transactions must include an adjustment to assure that both the seller and the buyer end up paying their share of the annual property tax, proportionate to the percentage of the year that each has ownership of the property. Usually required by institutional/commercial lenders and by the real estate contract.
- Pro-rata Homeowner Association Dues, paid by the seller, buyer, or both. If the property is covered by a Homeowner Association (HOA), the HOA will normally be funded by dues assessed against each property owner. Again, since the ownership of the seller and buyer are each fractional in the year of the transaction, there must be an adjustment made so that each owner pays their proportional share. Often required by institutional/commercial lenders and by the real estate contract.
- Pro-rata Interest, paid by the buyer. The monthly mortgage payment is calculated and payable on a specified day each month. If the closing does not actually fall on that specified date (which is usually the case), then an adjustment must be made to calculate the interest on the loan for the number of extra days until the first payment is due.
Other items in addition to the above may be common in some jurisdictions, and some transactions may include unusual or unique items as closing costs. In the United States, Federal law requires that all residential transactions financed by a mortgage have all closing costs documented in detail upon the standard HUD-1 form. This information must be provided to the principals but does not have to be sent to the government. Instead a Declaration or Statement by Buyer and/or Seller is often required to be provided to the government office recording the deed. Form 1099-S may be required to be sent to the United States Internal Revenue Service, but Federal law does not allow a charge for this.
Primary Residence Tax Benefits
A: I've been recently asked this question a lot by my own clients so figured to make it into a post to clear up any confusion. If you are a homeowner or preparing to purchase your first home, here are the tax relief guidelines (as noted directly from the IRS) that you will have to meet to save the big bucks!
To claim the maximum exclusion on the capitol gains on the sale of your home, you MUST first meet the Ownership and Use tests.
OWNERSHIP & USE TESTS (Out of 5 YR Period)
Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test)
Example 1 - home owned and occupied for 3 years.
Amanda bought and moved into her main home in September 2002. She sold the home at a gain on September 15, 2005. During the 5-year period ending on the date of sale (September 16, 2000 - September 15, 2005), she owned and lived in the home for 3 years. She meets the ownership and use tests.
Now that you are aware of the Ownership and Use Tests that you must pass, you can move on to how much you can deduct. Here are the Maximum Exclusions as noted on the IRS website.
MAXIMUM EXCLUSIONS
You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:
You meet the ownership test
You meet the use test
During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home
If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed.
You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true.
You are married and file a joint return for the year (IT IS NOT REQUIRED THAT BOTH OF YOU ARE ON THE TITLE OR STOCK CERTIFICATE)
Either you or your spouse meets the ownership test
Both you and your spouse meet the use test
During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home
If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property.
UrbanDigs Says: The tax benefits that Uncle Sam provides to you for investing in housing in America is what makes it such a wise investment, and an investment that historically has proven to build wealth and appreciate over the long term. By understanding exactly what you need to do to qualify for the maximum exclusion, you are on the right track towards building wealth and living a financially sound and independent life! Good Luck!
So you paid $100 or so in additional interest?
Consider that as tuition in the School of How to Move Large Sums of Money.
To recap the lessons:
If you are SENDING money
1) Call the receiver and get wire transfer instructions. Call your bank, set up wire transfer, pay roughly $20 fee. But if you insist on doing it mail-a-check route, then
2) Call the receiving bank. Tell the CSR you are paying off the loan via a check. Ask for the address to send something by OVERNIGHT MAIL. That's the clincher, make it very clear you are sending this by fedex, DHL, or however. The address for these payments may be different than the one for regular payments. Always ask.
3) Send it by your preferred overnight delivery company. Yep, pay the $14.95 fee or whatever. Trust me, it'll be worth it. Save that little receipt with the tracking number.
4) The next day, go online and confirm delivery. Then CALL THE BANK AGAIN and tell them they have received your payment, has the payoff been credited? You might get some confusion, the CSR will explain that the mail room may have received it but it has not been processed ... at which point you tell them this is IMPORTANT and that ASK WHICH OFFICE SPECICALLY should receive it. Note you will call back again tomorrow to make sure it is there.
5) Call back again the next day...keep insisting until you hear that the payment has been received and don't consider it "case closed" until you've received the payoff letter.
With mailing receipt in hand, you have proof of mailing and receipt in the event of delays in crediting your payment caused by the bank.
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