A mortgage can seem eternal, but all things do end. If you are approaching the end of your mortgage, you are coming up with a huge relief and a new level of financial freedom. Knowing what to do after paying off your mortgage will help you make the most of it!

Let’s take a look at what to do as you are making your last payment and what to look for after the payment has been made.

What to Do as You Are Making Your Last Payment

A couple standing in front of a house.

Your last mortgage payment will be a bit different than every other payment done so far. Here are a few things you should be ready for.

🏡 Learn more: Navigating the mortgage process as a self-employed individual? Here’s a guide on getting a mortgage when self-employed.

1. Ask Your Bank/Lender for a Payoff Quote

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

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

The payoff quote will detail exactly how much money you have left on your mortgage, both principal and interest. It will also tell you when you need to make that payment. If you fail to pay by that date, you may be assessed an additional interest charge.

2. Be Prepared for a Few Extra Fees

When paying off your mortgage, you will likely have to pay a few extra fees that vary depending on the state you are in as well as on the particulars of your situation. These fees can range between $40-$260.

Here are some of the fees that you might come across:

  • Recording Fee
  • Statement Fee
  • Calculated Interest
  • Reconvey/ Release Prep Fee
  • Expedite Fee
  • County Recording Fee

If you don’t want to be surprised when you receive your payoff quote, you could ask your mortgage lender ahead of time about the fees that will most likely pop up. You could even ask them about these fees months before you actually make that final payment.

3. Follow Your Lender’s Specific Instructions

Even though you might have been making your mortgage payments online so far, that final payment will probably be a bit different: Some lenders insist that you send in that final payment through a certified check or a wire transfer.

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

What to Do After Paying Off Your Mortgage

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

1. Cancel Any Automated Payments

After automating your payments for years, you might wonder what to do after paying off your mortgage. Such automation offers convenience, reduces the burden, and guarantees that mortgage payments are always timely and never missed.

So, if you had also set up automatic payments, then the first thing you want to do is to cancel them. You will feel an immense sense of satisfaction as you hit that “cancel” button. Do this immediately so don’t have to go through the hassle of asking your lender for a refund.

2. Let Your Homeowner’s Insurance Provider Know That You Have Paid Off Your Mortgage

The next step you can take when you’re wondering what to do after paying off your mortgage is to let the homeowner’s insurance provider know of it. Your loan servicer has probably been paying your homeowner’s insurance from an escrow account. This escrow account was funded through premiums that were tacked onto your monthly payments.

Now that you have paid off your mortgage, you will be responsible for paying and maintaining your homeowner’s insurance.

Lenders require homeowner’s insurance because they have a financial stake in the home. Once you fully own your home, you don’t need to keep your homeowner’s insurance. It is still a good idea to maintain it as it can protect you should your property get damaged in the future.

If you decide to keep your insurance, call the insurance company and let them know that you have paid off your mortgage and that you plan to keep your coverage. After that, you will pay the monthly premiums on your own.

👉 Learn more: Buying a home soon? Get clarity on what closing costs are and who usually pays them.

3. Contact Your Local Taxing Authority

The third step you can take when deciding what to do after paying off your mortgage is to contact the local taxing authority. The escrow account held by your mortgage lender probably paid your property taxes just as it did your homeowner’s insurance. And, again, as the escrow account has been closed, you need to start paying your property taxes.

You should contact your local taxing authority, let them know that you have paid off your mortgage, and inform them that you will be making the payments from now on.

In return, the taxing authority will send you a bill for your property taxes. You can pay that bill monthly, quarterly, or annually.

👉 Learn more: Navigating your taxes? Get a better grasp on how taxes work with our latest article.

4. Check Up on Your Escrow Account and See if There Is Anything Left

Once you’ve made the final payment, it’s important to consider what to do after paying off your mortgage regarding your escrow account. This is the account used to pay your insurance and taxes, and it might still have some remaining funds. If so, then these funds should find their way back into your bank account a month after making that last mortgage payment.

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

5. Make Sure You Receive a Satisfaction of Mortgage 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 declaring that you’re loan is paid in full, along with a Satisfaction of Mortgage Statement. This document acts as physical proof that you’ve fully met your debt obligations and that the property is fully yours now.

6. File the Satisfaction of Mortgage Statement

Armed with your Satisfaction of Mortgage Statement, you should go to the county clerk’s office and let them know that you own your property with no outstanding debt. Once you do that, the clerk’s office will update their local records, reflecting your full ownership and removing the mortgage company from the title.

In some cases, your mortgage lender may file the statement on your behalf. In others, the responsibility rests on your shoulders. Even if the lender is supposed to file it, it is worth checking to make sure it’s done.

7. Make Sure Your Credit Report Reflects the Satisfaction of Your Mortgage

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

8. Find Out How Much Your Property Is Worth

Knowing what to do after paying off your mortgage includes assessing the worth of what is likely your most significant asset. If you have any future plans, such as taking out a HELOC or a home equity loan, then you need to know how much equity you have in your property.

9. Keep the Documents That Show You Have Paid Off Your Mortgage

Having gone over all the necessary steps of figuring out what to do after paying off your mortgage, we should take a moment to highlight the most important documents you need to hold on to throughout the entire process:

A. The Loan Payoff Letter and the Satisfaction of Mortgage Statement

You should always have these two on hand as they demonstrate that the mortgage company no longer has a claim to your property. These documents show that the lender has released the trust deed on your property.

B. The Title Insurance Policy

When you first buy a house, you usually pay a one-time premium for a title insurance policy. Now that your mortgage has been satisfied, that policy has become more valuable. After all, if a title issue pops up tomorrow, your title insurance will help protect all the investments and mortgage payments you have made over the past few decades.

C. The Last Loan Statement

It’s good to keep your final mortgage statement stashed along with your other documents. The reason is that 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 might need this information.

D. Other Documents You Might Receive

In some cases, a lender may send you a canceled promissory note in addition to a canceled trust deed. This isn’t necessary, and many lenders don’t do this. If they do, keep the documents.

Life After Paying Off Your Mortgage

Paying off your mortgage means you will have more disposable income every month. The average US mortgage payment is $1,768, so your monthly budget will probably be getting a substantial boost.

Remember to set aside a portion every month to pay your property taxes and homeowner’s insurance. Your lender is no longer paying those, remember?

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

  • Start by splurging on yourself a bit. Having just crossed an enormous milestone, you deserve to give yourself a treat. You can take that vacation you’ve always wanted to go on or buy that newer model car to fit the whole family.
  • Keep a healthy emergency fund. Almost two-thirds of Americans live paycheck to paycheck, especially with all the obligations they have to meet[1]. This doesn’t have to apply to you. You should keep an emergency fund that covers around three to six months of living expenses.
  • Fatten your retirement fund. You can never have too much money when you retire. After all, whatever you don’t use will eventually make its way to your loved ones. So, why not put money into a tax-advantaged retirement account? If you’re over 50 years old, you are allowed to make catch-up contributions.
  • Make your home a nicer place. You can finally afford to add that patio to your backyard, or you can remodel your kitchen. If you plan to grow old in the home you’ve just paid off, then you might want to consider installing some accessibility features before you need them. For instance, wider bathroom entrances and grab bars in the showers can be a godsend.
  • Pay off any other debt you may have. The average American has around $5,733 in credit card debt, which typically has higher interest than other loans. Paying that off can provide another boost to your budget.
  • Invest in your family members. You can now help your children and grandchildren achieve their dreams. You can invest in your daughter’s business, pay off your grandson’s student loans, or help your sister pay off her mortgage.

You can spend that newfound windfall any way you want; after all, it’s yours. What’s important is to think about it and build a plan for how you want to spend it. That way, you can be sure that money is serving your needs and not your whims.

Putting It All Together…

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

Once you have sent in that final payment, you should make sure that you hold on to all of the documents that prove your full ownership while also notifying the relevant entities of the new status of your home. After you’re finished with the entire process, you will have a chunk of extra money at the end of every month that could benefit you and your loved ones for the long haul!

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