Paying off a hard money loan
Hi, Allison –
I recently lost my contractor and had difficulty finding another one to finish my fix & flip, and so opted to pay off my hard money lender (HML) in full in order to avoid losing the property and to maintain slightly better control on my profit margin, since I was just fed up with additional points and fees and really didn’t want to take out another loan. The hard money lender said I was the first person who had ever actually paid off their loan, and thus did not have a regular receipt or other document to provide, so they actually gave me a hand-written receipt when I handed over my certified check! I asked for a certificate of satisfaction, but the document they sent me was issued by the bank they were using, and it only referenced the agreement between me and the HML, without referencing any secondary document between the bank and the HML. To me, that doesn’t seem right, and I feel I might have problems when I finally finish the project and attempt to go to closing.
Isn’t the HML required to directly provide me a more official release or certificate of satisfaction that indicates the terms of the HML agreement have been fully satisfied? All I have is a text message from the HML that basically says the case is closed. If they can’t directly give me a release because they sold my loan to the bank, then shouldn’t the bank, in turn, be able to provide me with the reference number to the release/cos of any secondary loan secured by my loan agreement/property? It just doesn’t seem right that a bank I never had any direct dealings with could issue a COS to me that references the loan agreement between me and my HML. That doesn’t seem like a legal document. What do you think?
Thanks for visiting our site and the forum. Yes, that does seem odd that you don’t have more than a text message and hand written receipt as proof of paying off your loan. A certificate of satisfaction is common and I don’t know the exact details or the company but I would recommend speaking to a higher up at the hard money company and then get a direct number for the right contact at the bank your loan was sold to. If that doesn’t work out, you may need a real estate attorney to look into it more closely for you so you don’t have any issues when you go to sell the house. It’s better to resolve any issues before the house is ready to sell so it doesn’t delay the sale. I wish you the best of luck and hope everything works out.