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Issues with paying off a mortgage early

October 20, 2017
By ERIC FEICHTHALER - Real Estate Law , Cape Coral Daily Breeze

Dear Mr. Feichthaler:

I purchased my house about 8 years ago, and borrowed money from a friend to help pay for it. He placed a mortgage on the property, and I have been making monthly payments as agreed. Because we were in the depths of the recession, he gave me a 2 percent interest rate. I am now selling my house, and wondered about a few things. Do I need to pay him off before the closing? And, since the mortgage was for 20 years, is there a possibility he would reduce the amount owed since I am paying early?

- L.W.

Dear L.W.

Your friend sounds like a nice person to give you a loan at that rate. He must have looked at the loan to you as a very safe investment. Once you sign a contract with your buyer, you can choose the firm who will handle the title transaction and closing. One of the many roles a closing firm fills is to determine all debts that must be paid at the sale of the property. This includes the mortgage you mention. So, they will contact your lender, obtain a payoff letter from them, and pay them in full at closing from your sales proceeds. The closing firm should also obtain a satisfaction of mortgage from the lender to ensure title passes unencumbered to the next purchaser. You do not need to make any final payment to your lender while the contract is in place, but you should continue to make monthly payments as scheduled.

You are welcome to negotiate with the lender to see if they will take a reduced amount of the principal owing. Considering the very low interest rate, they may have incentive to allow you to pay a reduced amount to get their money back more quickly. However, if they are aware you are selling soon, they will also be aware they will be repaid, in full, when that sale occurs. There are few instances where I have seen such a negotiation prove unsuccessful, but it never hurts to ask.

Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continued his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest from 2011-2015, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.



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