What to do after paying off the mortgage

A mortgage may seem like forever, but everything comes to an end. If you’re nearing the end of your mortgage, you’re in for a huge relief and a new level of financial freedom. Knowing what to do after your mortgage is paid off will help you make the most of it!

Let’s take a look at what to do with the last payment and what to watch out for after making the payment.

What to do when you make your last payment

Couple standing in front of house.

Your last mortgage payment will be a little different than all the other payments you’ve made so far. Here are a few things you should be prepared for.

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1. Ask your bank/lender for a quote

To make this final payment, you will need to get a quote from whoever is servicing your loan. You contact your mortgage company, provide your loan number (it’s on your mortgage statement) and tell them you want to make a final payment and need a quote.

You don’t have to show up physically; you can either call them or notify them through their website.

A payoff offer will tell you exactly how much money you have left on your mortgage, both principal and interest. It will also tell you when the payment is due. If you do not pay by this date, you may be charged additional interest.

2. Be prepared for a few extra fees

After you close your mortgage, you’ll likely have to pay a few additional fees that vary depending on the state you’re in as well as the details of your situation. These fees can range between $40-$260.

Here are some of the fees you may encounter:

  • Upload fee
  • Statement fee
  • Calculated interest
  • Transfer/Release Preparation Fee
  • Expedited fee
  • County Record Fee

If you don’t want to be surprised when you receive a quote, you can ask your mortgage lender in advance about the fees that are most likely to appear. You can even ask them about these fees months before you actually make the final payment.

3. Follow the lender’s specific instructions

While you may have been making your mortgage payments online until now, this final payment will likely be a little different: Some lenders insist that you send this final payment by certified check or wire transfer.

In that case, follow your lender’s instructions to pay what you owe and get it over with.

What to do after paying off the mortgage

Now that you’ve made your final payment, the real fun begins. You can tell the world that your home is 100% yours. Let’s take a look at what to do after paying off your mortgage.

1. Cancel any automatic payments

After years of automating payments, you may be wondering what to do after your mortgage is paid off. Such automation offers convenience, reduces burden and ensures that your mortgage payments are always on time and never missed.

So if you have set up automatic payments as well, the first thing you want to do is cancel them. Once you hit the ‘cancel’ button, you’ll feel an immense sense of satisfaction. Do this immediately so that you don’t have to ask the lender for a refund.

2. Let your home insurance provider know you’ve paid off your mortgage

Another step you can take when you’re wondering what to do after paying off your mortgage is to let your home insurance provider know. Your lender probably pays your home insurance from an escrow account. This escrow account was funded through premiums that were credited to your monthly payments.

Now that you’ve paid off your mortgage, you’ll be responsible for paying and maintaining your home insurance.

Lenders require home owner insurance because they have a financial stake in the home. Once you own your home outright, you don’t need to have home insurance. It is still a good idea to maintain it as it can protect you in the event of damage to your property in the future.

If you decide to keep your insurance, call the insurance company and tell them you’ve paid off your mortgage and plan to keep your coverage. After that, you will pay the monthly premium yourself.

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3. Contact your local tax office

The third step you can take in deciding what to do after paying off your mortgage is to contact your local tax office. Your mortgage lender’s escrow account probably paid your property taxes as well as your home insurance. And again, since the escrow account was closed, you have to start paying property taxes.

You should contact your local tax office, tell them that you have paid off the mortgage and inform them that you will be paying from now on.

In return, the tax office will send you a real estate tax bill. You can pay this bill monthly, quarterly or annually.

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4. Check your escrow account to see if there is anything left

Once you’ve made your last payment, it’s important to consider what to do about your escrow account after the mortgage is paid off. This is an account used to pay insurance and taxes and may still have some funds left. If so, then those funds should find their way back into your bank account a month after you make your last mortgage payment.

If your bank account isn’t fatter within a month, you need to contact your mortgage provider and ask them about the remaining balance.

5. Make sure you get a mortgage satisfaction statement

Another important aspect to keep in mind when considering what to do after paying off your mortgage is to receive a letter from your lender about a month later stating that your loan is paid in full, along with a statement of satisfaction with mortgage. This document serves as physical proof that you have fully met your debt obligations and that the property is now fully yours.

6. Submit a statement of satisfaction with the mortgage

Armed with your mortgage satisfaction statement, you should go to the county clerk’s office and tell them that you own your property with no outstanding debts. Once you do, the clerk’s office will update its local records to reflect your full ownership and remove the mortgage company from the title.

In some cases, your mortgage lender may file a statement on your behalf. In others, the responsibility rests on your shoulders. Even if it’s to be filed by the lender, it’s worth checking that it’s done.

7. Make sure your credit report reflects satisfaction with your mortgage

After a month to a month and a half since your last payment, your credit report should show that you have met your mortgage obligation. Get a free copy of your credit report and double check it.

8. Find out what your property is worth

Knowing what to do after paying off your mortgage involves assessing the value of what is likely your most significant asset. If you have any plans for the future, such as going outside HELOC or home equity loanthen you need to know how much equity you have in your property.

9. Keep documents that prove you have paid off the mortgage

After going through all the necessary steps to figure out what to do after paying off your mortgage, we should take a moment to highlight most important documents you must adhere to throughout the process:

A. Loan repayment letter and mortgage satisfaction statement

You should always have these two handy as they prove that the mortgage company no longer has a claim on your property. These documents show that the lender has issued a deed of trust for your property.

B. Title Insurance

When you first buy a home, you typically pay a one-time premium for title insurance. Now that your mortgage is satisfied, the policy has become more valuable. Because if there is a title problem tomorrow, your title insurance will help protect all the investments and mortgage payments you’ve made over the past few decades.

C. Latest loan statement

It is a good idea to keep the final mortgage statement together with other documents. This is because the mortgage statement will contain valuable information such as the loan number and the toll-free contact number for the lender. You never know when you will need this information.

D. Other Documents You May Receive

In some cases, the creditor may send you a canceled promissory note in addition to the canceled trust agreement. This is not necessary and many lenders do not do this. If so, keep the documents.

Life after paying off the mortgage

Paying off your mortgage means you’ll have more disposable income each month. The average mortgage payment in the US is $1,768, so your monthly budget is likely to increase significantly.

Don’t forget to set aside a portion each month to pay your property taxes and home insurance. Your lender doesn’t pay them anymore, remember?

Once this is covered, there are many different ways you can put that extra money to good use:

  • Start by splurging on yourself a little. You’ve just crossed a huge milestone and you deserve a treat. You can take the vacation you’ve always wanted to go on or buy that newer model car to accommodate the whole family.
  • Maintain a healthy contingency fund. Nearly two-thirds of Americans live paycheck to paycheck, especially with all the obligations they have to meet(1). This may not apply to you. You should keep it emergency fund which cover approximately three to six months of living expenses.
  • Fat your retirement fund. You can never have too much money when choosing. Whatever you don’t use will eventually go to your loved ones. So why not put money into a tax-advantaged retirement account? If you are over 50, you can do this catch-up contributions.
  • Make your home a nicer place. You can finally afford to add that patio to your backyard or remodel your kitchen. If you plan to grow old in the home you just paid for, you may want to consider installing some convenience features before you need them. For example, wider bathroom entrances and handrails in showers can be a godsend.
  • Pay off any other debt you may have. The average American has about $5,733 in credit card debt, which usually has a higher interest rate than other loans. If you pay it off, it can mean a further increase in your budget.
  • Invest in your family members. Now you can help your children and grandchildren achieve their dreams. You can invest in your daughter’s business, pay off your grandson student loansor help your sister pay off her mortgage.

You can spend this newfound earnings however you want; after all, it’s yours. The important thing is to think about it and make a plan for how you want to spend it. This way you can be sure that the money is serving your needs and not your whims.

Putting it all together…

Making the final payment on your home is a joyous event, but you need to have a good understanding of what to do after paying off the mortgage so that you don’t spoil the opportunity with additional costs or other inconveniences.

Once you have sent this final payment, you should make sure you have all the documents that prove your full ownership, and at the same time inform the relevant entities about the new status of your home. After you complete the whole process, you will have a lot of extra money at the end of each month that could benefit you and your loved ones in the long run!

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