Even with a mortgage, you still own the home

By Steve Tytler Herald Columnist

Question: Thanks for the interesting and informative article last week about the technicalities of the sale of a home. I have a related question. We recently paid off our mortgage, a good feeling, owning our home free and clear.

After the expected exchange of paperwork, we received only a one-page document (certified and recorded original) “Deed of Reconveyance.” Not the actual Deed, or Deed of Trust?

The bank declines to send us anything else. We will (after upcoming retirement) probably sell our home. Are we OK?

Answer: First of all, let me assure you that you are already are on title as the owner of your home. So you don’t need a copy of the deed to prove it.

You often hear people say “the bank owns my house,” by which they mean that they are still making payments on a mortgage. However, that’s not true.

When you get a loan to buy a car, the bank typically holds the title to the car until you pay off the loan. But when you buy real estate, you “own” the house from the moment the deal closes and the deed is recorded with the county.

Washington is a “lien theory” state, which means that your mortgage lender has a lien on your house that gives them the right to seize the property and sell it at auction to pay off the mortgage if you fail to make your payments.

But the deed is recorded in your name only. Check your title insurance policy and you will see that you are listed as the legal owner of the property and your lender is listed as a lien holder, along with your property taxes and other encumbrances.

The mortgage lender’s lien is called a “deed of trust.” When your loan is paid in full, the lender will record a “reconveyance” document to release their lien on your property. That is the document that you received after it had been recorded at the county recorder’s office.

You don’t have to do anything to gain legal title to the property because as I explained above, you already have it. So congratulations, the bank’s lien has been released and you now own your home free and clear of any liens against the property, unless you have other debt secured by your home.

Frankly, you should consider yourself lucky because sometimes banks get busy and fail to record the reconveyance in a timely manner. Typically, the reconveyance is recorded within two months, but it can take longer in today’s very busy mortgage market.

A few years ago, a friend of mine paid off his mortgage and it took several months of phone calls to get the bank to finally record the reconveyance.

Also, when your loan was paid off you should have received a letter from the bank saying that your mortgage had been paid in full, along with a refund of the remaining balance of your escrow account (if you had one) that holds funds to pay your property taxes and homeowner’s insurance.

Homeowners who have paid off the mortgage on their home but have not yet received a reconveyance document can usually review the county property title records online to check to see if a reconveyance has been recorded.

For example, in Snohomish County you can do a records search on the county website: www1.co.snohomish.wa.us/County_Services/Public_Records/.

Search the “Official Public Records” for your property and see if a “reconveyance” document has been recorded on the title to your property to remove the mortgage lien.

If you do not see the reconveyance, call the bank and ask to talk to a supervisor in the pay-off department or lien release department and tell them you have paid off your mortgage but the reconveyance has not been recorded.

You may have to make a few calls until you get to a person who has authority to take care of the problem.

This is why I recommend that homeowners use a title company escrow department to handle the final payment of their loan when they pay off the mortgage on their home to make sure all the proper documents are recorded.

It will cost a few hundred dollars for that service, but it’s worth it to make sure that you truly own your home free and clear.

Steve Tytler is a licensed real estate broker and owner of Best Mortgage. You can email him at features@heraldnet.com.