Weekly financial Q&A, with advice on pre-paid legal fees and mortgages.


 

Dear Dave,


Do you have an opinion on whether or not pre-paid legal is a product worth purchasing?


Anika


Dear Anika,


I’m not mad about pre-paid legal. But a lot of folks who recommend and advocate it don’t like me very much, because I tell people it’s a bad idea. Here’s why: Pre-paid legal will cost you about $300 a year. If you take $300 a year, and multiply that out over 10 years, you’re looking at $3,000. The truth is that the average American consumer doesn’t spend $3,000 on legal bills in this amount of time.


Lots of people will tell you that you miss out on tons of opportunities by not having a lawyer ready to jump into things. That’s a bunch of garbage! Once in a great while you may need the services of an attorney, but think about this: If the average person spent $3,000 or more over the course of 10 years on legal bills, while pre-paid legal took $3,000 from each of these people, pre-paid legal would go broke, wouldn’t it? They’d be handing out more in legal services than they receive in fees!


On average, you’ll come out better if you self-insure by having a good emergency fund in place. That way, you’ll have the money to pay for legal services should the need arise. And part of the reason you’ll have the money in place is because you didn’t give it to someone else — like pre-paid legal! 


Obtaining the deed


Dear Dave,


We live in Missouri, and we just paid off our mortgage in July. Do we have to contact the mortgage company to get the deed?


Karen


Dear Karen,


It can vary depending on where you live, but I believe Missouri is a Deed of Trust and note state. The deed of trust is the lien against your house, and the mortgage company is supposed to file a release at the courthouse for that Deed of Trust. Next, they should send you a copy, but it’s not unusual for things like this to take three or four months.


They’ll also send you the original note you signed at closing. This should have “paid in full” stamped or written across it in big, bold letters. That note becomes your property. If they didn’t signify that the deal is done, you should write “paid in full” on the front yourself, and keep it in a very safe file forever. The original note is the documentation that you owed money, and the Deed of Trust contains the lien against your house. Typically, they will also send you a copy of the release of lien on the Deed of Trust.


Just understand that most mortgage companies move slowly. But don’t be afraid to start rattling a few cages if Christmas rolls around and you still haven’t heard from these guys!


Dave Ramsey is a nationally known personal finance expert. Visit www.davesays.org for more financial advice.