What Happens When I Pay Off My Mortgage Loan?
WHAT YOU'LL LEARN
What documents you’ll receive to review and sign.
What bills you’re now directly responsible for.
Ideas for that extra monthly money!
WHAT YOU'LL LEARN
What documents you’ll receive to review and sign.
What bills you’re now directly responsible for.
Ideas for that extra monthly money!
You’re about to pay off your mortgage – congratulations! But there are a few final steps to take to ensure your home is officially yours. Here’s what to expect next.
Mortgage Release Documents
Once you’ve made your final payment, your lender or loan servicer will send you a set of documents the officially release you from your loan and remove the lien on your home. Typically, documents will include:
Canceled promissory note: The note you signed at closing stating you would pay the loan back.
Loan payoff letter: A document showing you don’t owe anything more on the mortgage.
Deed of reconveyance: A lien release stating the lender has no legal interest in the property.
Escrow funds: A check for any remaining money in your escrow account.
Property deed: A document proving you are the sole property owner.
Certificate of satisfaction: A document from the local clerk showing you’ve paid off your loan.
It’s a good idea to call your local clerk’s office to confirm they’ve received the necessary documentation from your lender to prove the home is yours.
Update Your Insurance and Taxes
Your monthly mortgage payment likely had your property taxes and homeowners insurance rolled into it, paid from an escrow account. Now you’ll need to handle those yourself.
If you want to keep your current insurance provider, just let them know they will need to bill you directly. They will also remove your lender as the beneficiary on the policy.
For your property taxes, notify your clerk’s office that they will need to bill you directly. And if you paid a homeowners association (HOA) fees through your mortgage payment, those fees are now yours to pay, too – just reach out to your property manager or HOA.
By law, any remaining funds in your escrow account must be refunded to you by your loan servicer or lender within 20 days of closing the account.
Preparing for Extra Monthly Cash
It’s great to enjoy the new cash infusion from paying off your mortgage but be mindful of how you spend it. You’ve worked hard to maintain your home as an investment, so it’s smart to keep that attitude with your new funds. We’ve got some suggestions:
Pay off debt: Paying off high rate credit cards and other loans can save you interest and grow your credit scores.
Start (or grow) an emergency fund: Keep some cash ready for unexpected expenses. A good rule of thumb is three to six months of living expenses.
Grow your retirement accounts: Add money to your existing investments or create new ones.
Consider your financial goals: Whether you want to travel, buy an investment property, or go back to school, now you have the money to reach your goals, without going into debt.
Check Your Credit
Once you’ve paid off your loan, it’s smart to check your credit reports to be sure they reflect the payoff and show a zero balance. Be aware that when you pay off your mortgage, your scores may briefly decline.