When you pay off your mortgage, take these steps to smooth the financial path as you assume full ownership of your home:
Paying off your mortgage is cause for celebration. Before you pop the Champagne, however, take these steps to smooth your financial path to full homeownership.
Paying off your mortgage is a huge accomplishment. You’ve finally reached the finish line after years of making monthly payments. Now you own your home free and clear! But what happens next?
Here’s a complete guide to the steps you should take after paying off your mortgage:
Get Confirmation From Your Lender
First, your lender will send you confirmation that your mortgage has been paid in full. This usually comes in the form of a payoff letter. Hang on to this document in case you need proof later on.
You should also receive a mortgage satisfaction document This is recorded with the county clerk to show that the lien on your home has been released, Having this public record is important for proving you own the home outright,
In addition, log into your account and download your final mortgage statement showing a $0 balance. Print this out and save it with your other mortgage payoff paperwork.
Cancel Automatic Payments
Now that your mortgage is paid off, cancel any automatic payments you had set up. You want to avoid accidentally sending an unnecessary payment.
Notify your bank that you will no longer be making mortgage payments from your account.
Get a Refund of Leftover Escrow Funds
If you had an escrow account with your mortgage, your lender has 20 days to send back any leftover funds after paying your final bills. This will be the extra money you had pre-paid for taxes and insurance.
Double check the amount and make sure it matches your final escrow analysis statement. Follow up with your lender if you think the refund amount is incorrect.
Update Your Tax and Insurance Bills
Your property tax bills and home insurance bills will now come directly to you rather than through your mortgage servicer.
Contact both your local tax collector’s office and your insurance company. Provide your address and request that they update your contact information and send all future bills to you.
Start Paying Taxes and Insurance Yourself
Now that you’re mortgage free, it’s your responsibility to pay property taxes and insurance premiums when they are due.
Make sure you have a savings account set up or budget plan in place to cover these ongoing homeownership costs. You don’t want to fall behind and risk losing your home.
Set calendar reminders so you know when payments are due each year. Sign up for auto-pay through your insurance company and county tax office websites whenever possible.
Monitor Your Credit Reports
In the months after paying off your mortgage, periodically check your credit reports. Verify that they accurately show your mortgage as paid in full and closed.
This is easy to do for free at AnnualCreditReport.com. You can get reports from Equifax, Experian, and TransUnion once per year.
Celebrate Being Mortgage-Free!
Paying off your mortgage is reason to celebrate! After all your years of hard work, it’s time to relax and enjoy being debt-free.
How you choose to celebrate is up to you. Some ideas are taking a dream vacation, hosting a mortgage-burning party, or buying yourself a nice gift with money you’ll save each month.
Make a Plan for Extra Cash Flow
With your mortgage payment eliminated, you’ll likely have hundreds extra in your budget each month. Make sure you have a plan in place for this new cash flow.
Some smart ways to use the extra money are building your retirement savings, paying off other debt, funding college for your kids or grandkids, investing, and home renovations. Don’t let lifestyle inflation absorb it all.
Adjust Your Financial Goals
Now is the time to take a fresh look at your overall financial goals. With a major expense like your mortgage gone, your priorities may change.
Maybe you’re able to retire earlier than expected. Or perhaps you can downsize to a smaller home if that appeals to you. Reassess what’s important as you enter this next phase of life.
Weigh Using Home Equity
Owning your home free and clear gives you instant equity. Tapping into it can give you access to funds if needed through a home equity loan or line of credit.
This can be a good option for consolidating other high-interest debt or financing major expenses like college or home improvements. Compare rates and shop around to find the best home equity deal.
Keep Saving for Emergencies
Just because your mortgage is paid off doesn’t mean you should empty your emergency savings account. It’s still vital to keep 3-6 months’ worth of living expenses set aside.
Without your safety net, you could be forced to borrow or sell your home if you lose your job or have major unexpected bills. Don’t jeopardize your newfound financial stability.
Maintain Insurance Coverage
It can be tempting to cancel your homeowners insurance to save money once your mortgage is paid off. But don’t do it! Your policy provides financial protection if your home is damaged.
Not only could you lose your house in a disaster, but your assets would be at risk from liability claims. Review your coverage to make sure it still fits your needs.
Keep Homeowner’s Title Insurance
You probably won’t need to use your owner’s title insurance policy. But hang on to it in case a title defect pops up later that threatens your home ownership rights.
Hold On to Home Records
Keep your closing paperwork, purchase price records, and home improvement receipts forever. You’ll need documentation of your cost basis if you eventually sell the house.
Long after your mortgage is just a distant memory, these records will still be important if you eventually sell your home.
Stay On Top of Maintenance
Now is the perfect time to refresh your home maintenance skills. Take time to locate your water shut-off valve, main electrical panel, HVAC filters, and other important systems.
Schedule a review of your roof, appliances, plumbing, and anything else that might need repairs soon. Taking care of your home is essential for protecting your investment.
Celebrate Being Debt-Free
Few things in life feel as good as owning your home outright! After making payments for so many years, you deserve to celebrate being 100% debt-free.
Make sure to commemorate this huge milestone in a way that is meaningful to you. Whether it’s a lavish dream vacation, hosting a party, or finding small ways to treat yourself every day, enjoy your accomplishment.
Paying off your home loan is a major achievement. Follow these steps to make the most of your new mortgage-free status. With smart planning, you can now use your hard-earned home equity to help you meet other financial goals.
You’ll Receive Mortgage Release Documents
After you make your final mortgage payment, your loan servicer typically sends you a packet of papers, known as the mortgage release or mortgage satisfaction document, attesting to the fulfillment of your loan contract and the removal of the lenders lien on your house. The packet typically includes:
- A declaration that the mortgage has been paid in full.
- Your promissory note for the loan amount (one of the many documents you signed at your closing), marked as canceled.
Many lenders will also file a certificate of satisfaction with the municipal authority that maintains property deeds where you live. The certificate releases the deed on your home to you and indicates you are now the sole owner. Ask your loan servicer if they will do this for you. If they will, be aware that it can take a few weeks or months for the documents to be filed and updated.
Once your lender has told you theyve filed the documents, contact your local records office to confirm their files indicate your mortgage has been canceled. If your lender will not file the certificate of satisfaction, you should file it yourself. Just check with your local municipal clerks office to find out what to do.
You’ll Need to Update Your Insurance and Taxes
In addition to covering the installment on your home loan, your monthly mortgage payments likely collected funds used to pay for homeowners insurance coverage and your annual property taxes. If so, the portion of each payment allocated to insurance and taxes was stored in an escrow account—a dedicated bank account set up for that purpose—from which the loan servicer would pay taxes and insurance premiums on your behalf.
When you have paid off your mortgage in full:
- Your escrow account will be closed. Any funds remaining in the account will be returned to you. The mortgage servicer is obligated by law to send you your escrow refund, if any, within 20 days after it closes your account.
- Youll become responsible for paying your home insurance. Mortgage lenders require you to carry property insurance to protect themselves in case your house—which is also collateral on their loan—is damaged or destroyed by fire, natural disaster or other calamity. Once your mortgage is paid off, youre no longer compelled to carry insurance coverage, but its wise to do so. If you want to continue with your current coverage and provider, notify them that they need to bill you directly, rather than through your loan servicer. Ask them to remove your mortgage lender as a payee or beneficiary on the policy.
- Youll be responsible for your property taxes. You should also notify any local authorities that issue property taxes that they need to bill you directly from now on, rather than go through your mortgage servicer. Depending on your location, you may just have a single annual property tax bill (typically collected by your county, town or city) or multiple bills payable to entities such as school districts, water and sewer districts and/or fire departments. The clerks office at your town or city hall can help you identify all relevant taxing authorities.
- Homeowners association fees become your responsibility (if they werent already). If you live in a townhome or condo community with a homeowners association (HOA) that collects dues or maintenance fees, your mortgage servicer may have handled those payments on your behalf as well. Youll need to let your property manager or HOA know when your mortgage has been paid off so they know to collect their fees from you directly.
We’re Paying Off Our House Tomorrow, What Now?
FAQ
What do I do after I paid off my mortgage?
What happens when your mortgage is paid off?
What happens to my escrow when I pay off my mortgage?
How do I know if my mortgage is paid off?
Receive mortgage documents: The mortgage company will send you a canceled promissory note, updated deed of trust and certificate of satisfaction. These documents prove that your mortgage is paid off. Save them in a secure location.
Should you pay off your home loan?
Here are some points to ponder: 1.**Advantages of Paying Off Your Mortgage Early**: – **Sense of Ownership**: When you pay off your mortgage, you truly own your home, which can bring a sense of pride
Can You Live a life after your mortgage is paid off?
For many homeowners, the dream of a life after your mortgage might seem like a distant but enticing prospect. If you’re a homeowner approaching this milestone, you may be wondering how your financial situation may change and what opportunities may arise as soon as your mortgage is paid off.
What happens to deeds when a mortgage is paid off?
You may be wondering what happens to deeds when mortgages are paid off, and whether you’ll officially receive the title to your home. In fact, the first thing you should look for after paying off your mortgage is a letter mailed to you by your lender, including several key documents related to your loan.