Final mortgage payment not accepted by check

Q: When my 360th (and final) mortgage payment came due I was informed that a personal check wouldn’t be acceptable. I had to submit a certified check with almost more information on the check than could fit. I had to include everything except my inseam size number of original teeth remaining on my mouth.

Why are 359 personal checks acceptable over the life of the loan but the last one has to be so special?

Final mortgage payment should have been accepted by check

A: Banks can be such a pain. Why indeed? We agree with you. There’s no reason a lender should accept personal checks for the entire 30-year loan term only to demand that the last payment be given to them by bank check or wire transfer. It makes no sense to us.

Some lenders want final mortgage payment by wire transfer

We understand that sometimes lenders have a policy to accept the loan payoff on a loan by wire transfer or bank check and not personal checks. But those situations are typically different than what you’re describing. Let’s say, you are five years into a loan and decide to refinance or sell. The lender wants to make sure that the funds they receive for the payoff are good funds so that they can then turn around and release the lien they have on the home.

You have a new lender coming into the picture or a new buyer purchasing the home. The urgency of making sure that the money is good and that the bank receives the funds by wire transfer or bank check seems appropriate under these circumstances.

Selling a home and paying off the lender is different from making final payment

Well, those situations are quite different than when you are simply making the final payment on a loan. You’re not selling the home. You’re not refinancing the home. You are simply making the last payment. If the check fails to clear, the lender still has a lien on the home and can assess late fees as it would with every other payment during the 30 years it held the loan.

The lender can simply wait for the funds to clear before the lender begins the process of sending out the canceled promissory note and the canceled mortgage along with the release of mortgage or release of trust deed.

We suspect the lender has a process in place for all loan payoffs and that process is not necessarily customer-friendly, as you have discovered.

Wire transfers are easier but unnecessary 

Having said that, sending a wire transfer is easier now than it was years ago. Better, some banks don’t charge a fee to send them out. Other banks do charge to send out a wire but don’t charge a fee for a bank check. Still others will charge you no matter what method you use.

Here’s where we think it’s unfair for a lender to force you to have to pay a fee to send out a wire or a bank check solely for you to make the last mortgage payment on the loan. Somehow, they’re probably profiting on that transfer of funds.

Send a double mortgage payment on your 359th payment instead

We wonder if you’d have been better off sending a double mortgage payment on your 359th mortgage payment and watching to see if they cashed that check and netted your mortgage loan out to zero. If they did, your loan would have been paid in full and you might have avoided the hassle of having to send out a wire transfer or bank check for the last payment on your mortgage.

If you’re sufficiently aggravated, you can call the lender and complain to them about having to pay a fee to send in your last loan payment. Ask if they would accept your check anyway. If they say no, or if you get a negative response, you can file a complaint against the lender with the agency in your state that regulates mortgage lenders, or the Consumer Financial Protection Bureau, or, depending on the lender with the Office of the Comptroller of the Currency (OCC). Thanks for your question.

Read more about final mortgage payments

Can’t Pay Mortgage: Final Payment is Due

Sign up for Ilyce Glink’s Love, Money + Real Estate newsletter


©2023 by Ilyce Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency. C1608