Legal Question in Real Estate Law in California

Re: Paying off Mortgage.

It depends to some extent on the sophistication of the private party and the party's relationship to you. In general, I would recommend using the services of an escrow company. The important issues are to be sure that the existing liens are paid in full and that anyone holding a lien releases it upon pay-off. If the lien is a deed of trust, the holder should execute a so-called 'full reconveyance' shortly after pay-off. The reconveyance and the new loan instruments need to be recorded.

There are also steps your new lender should be taking to protect his/her interests. These would include a title search and lender's title insurance. The loan should also require you to maintain fire insurance in effect.

If the property is your primary residence you should be able to deduct the interest from your income in arriving at your taxable income. To this end your loan should make clear how much of each payment is principal and how much is interest. There are amortization tables available for this purpose (ask your escrow company).