It’s got a nice ring to it, doesn’t it?
If you’ve sent in that final mortgage payment, congratulations! Go celebrate! But read this first.
Paying off your mortgage and owning your home free and clear is a huge milestone, and one that your friends will definitely be jealous of. However, there are still a couple of things you’ll need to do. We’ll fill you on those steps and provide some suggestions on where you may be able to use those extra funds.
Here’s what you can expect after you pay off your mortgage.
You’ll receive some important documents.
Once your loan is fully paid off, many lenders will return the mortgage promissory note and that you signed when you first took out the loan. The canceled promissory note confirms you’ve fulfilled the terms of the loan and no longer owe the lender any money. We recommend putting this document in a safe place. Your lender will also release the lien of the security instrument from your property by sending a satisfaction/release to the county where the property is located for recording.
Cancel your automatic deduction.
If you’ve set up automatic mortgage payments through your bank, you should get in touch with that bank and notify them to turn off automatic payments once your loan is paid off.
Make future payments of your school and property taxes and homeowners insurance.
Yes, you’re still going to have to pay for these things after your mortgage has been paid off.
If you’re like most people, your property taxes and homeowners insurance were rolled into your mortgage payment. This means they were escrowed by your lender, and the payments were made for you.
But now you’re in charge of making those payments. You’ll need to make sure you begin receiving these bills directly, so contact your local taxing authority(ies) and your homeowners insurance company. You may want to start setting aside money each month to account for these payments.
Use that monthly mortgage payment elsewhere.
No longer having a monthly mortgage payment means having leftover cash each month to do what you want with it. Keeping it in your bank account or putting it in your retirement fund may be a good place to start, but perhaps there are upgrades you finally have the extra money to make in the home, such as: renovating a part of your home that desperately needs it, a home improvement project to boost its resale value, or making some aging in place modifications so you can live out the latter years of your life in this home.
Plain and simple: reaching mortgage payoff can give you more financial freedom to invest back into your home and beyond.
The things above will set you up nicely for this next (and probably your favorite) phase of homeownership – being mortgage-free. Ok, now go out and celebrate. You’ve earned it.
And if you plan to buy your next home or a second one in the near future, you might need this: Your Cheat Sheet to Buying a Home When It’s Been a While.
Ditech is not a financial advisor and the ideas outlined above are for informational purposes only. They are not intended as investment or financial advice and should not be construed as such. Consult a financial advisor before making decisions regarding important personal financial matters, and consult a tax advisor regarding the deductibility of interest and tax implications.