Paying off the mortgage is definitely a cherishable moment in a person’s life. Once you paid off your mortgage you might feel a newfound sense of pride while walking around the house which is finally yours! Moreover, from the next month, you will have extra money on your budget that you can use to pursue your other dreams. So, overall, once you pay off the mortgage, you will feel relieved.
Paying Off the Mortgage: What’s Next
When you are paying the last installment of your mortgage payment, you have to ask the loan officer to give you a payoff quote. You can also request a payoff quote online by logging into your home loan account. If you don’t have an online account then you can also call the lender to send you the payoff quote. Usually, the payoff quote includes information regarding how much principal and interest you need to pay to completely own your house.
Moreover, it will also contain the date when you have to make the final payment. While making the final payment, you might have to pay some additional fees to complete the final paperwork.
What Type of Documents will you Receive after Paying Off your Mortgage?
What type of documents you will receive after paying off the mortgage depends on your mortgage type as well as your lender. Below are some documents that you might receive after paying the mortgage –
- Canceled Promissory Note: This type of document states that someone promises to pay off the mortgage. You might or might not receive this type of document. If you have other proofs that show you have paid off your mortgage, then you probably don’t need this document.
- Deed of Trust or Mortgage Deed: This is an official document that shows your lender has rights to your home if you stop paying the mortgage. Usually, when you pay off your mortgage, the lender will send you this document. If you don’t receive this document then you should contact your lender and ask them to send you the document.
- Certificate of Satisfaction: When your lender submits all the official documents regarding you paying off your mortgage to the local office of records, the office will record a certificate of satisfaction. You may have to pay a fee of $25 to $50 complete this process. You can ask the local office of records to send a copy of the certificate of satisfaction.
- Final Mortgage Statement: This is a very important document and you can get it for free. This document is proof that you don’t own any principal, interest, or fees. You should collect this document for future use.
- Loan Payoff Letter: Your lender will send an official letter stating you’re done paying off your loan. This is another important document to have at your disposal. You should keep in mind that if you don’t receive any documents within about 90 days of the certificate of satisfaction was recorder then you should contact your loan servicer and ask them to send you all the required documents.
What Steps to Take after Paying Off the Mortgage
Collecting the documents is not the only thing to do after paying off the mortgage. There are some important steps that you have to take once you pay off the mortgage. Check the below information!
- Cancel Automatic Payments: If you had set automatic payments for your monthly mortgage payment then you should immediately cancel the automatic payment to avoid any problem. Trust me, you really don’t want to make an unnecessary payment and then wait for the refunds!
- Get your Escrow Refund: If you had a mortgage escrow account while paying off the mortgage then check if there was any remaining balance on the account. If there was any remaining balance then ask for a refund. Usually, you will get a refund automatically after 20 days of paying off your loan. If you don’t receive the refund then contact your lender.
- Contact your Tax Collector: If the tax collector is sending property tax statements to your lender then call your tax collector and inform him that he doesn’t need to do that anymore. From now on the tax collector will send documents directly to you.
- Contact your Insurance Company: If you had an escrow account, then contact the insurance company and let them know that from now on, you will be paying the bills and ask the company to remove your loan servicer from the policy. You should follow this step for all the other loans that you have.
- Keep All Important Homeownership Documents: You must possess all the required documents after paying off the mortgage including the HUD-1 or closing disclosure that shows how much you paid for the property. You should keep these documents for future use.
- Keep Your Title Insurance: According to many experts, you should keep your title insurance for various emergencies. Paying off the mortgage doesn’t mean that there won’t be any undiscovered title defects. So, keeping the title insurance will protect you from various unnecessary problems.
- Set aside Money for Taxes and Insurance: Paying off your mortgage doesn’t mean you don’t have to pay the property tax or insurance anymore. After paying off the mortgage, you should keep your homeowner’s insurance for financial protection. Having the homeowners insurance will not only protect your home’s structure; but also protects your personal liability.
Is it Worth Pay Off the Mortgage Early?
This is a very common question among Americans who have a mortgage. Whether paying off the mortgage early would be worth it or not depends on various factors and conditions. Let’s check them out!
When you should not Pay Off the Mortgage Early
- If you have nothing to worry about paying off the mortgage
- If you have a good interest rate like 3% or below
- If you need to increase your savings or you need emergency cash
- If you are trying to create a retirement savings
- If you are getting a good tax deduction from the mortgage interest rate
- If you have other high-interest debts
When you should Pay Off the Mortgage Early
- If you have a very high mortgage interest rate
- If you have adequate savings and paying off the mortgage will help you save money on interest rate
- You don’t need retirement savings
- If your mortgage interest rate deduction doesn’t significantly affect your tax return
- You don’t have any other high-interest rate debts
- Finally, it’s your dream to become mortgage free!
FAQs about How does It Feel to Pay Off Mortgage
What is life like after paying off the mortgage?
Once you pay off your mortgage, you will have a chance to build wealth and savings for the future. Moreover, you don’t have to worry about paying large mortgage payments every month. You will have peace of mind and you will be able to prepare yourself financially for the future.
Does paying off a mortgage make sense?
There are many reasons, paying off a mortgage does make sense. For example, if your mortgage interest rate is very high then paying your mortgage early will help you save money on the interest rate.
What are the disadvantages of paying off your mortgage?
There are some disadvantages of paying off the mortgage early. For example –
- You will lose liquidity and you might need to apply for a home equity loan for emergencies
- You might lose the chance of tax deductions on interest payments
- You won’t be able to invest the money in other ventures, etc.
What is the ideal age to pay off a mortgage?
According to many financial experts, the ideal age to pay off the mortgage is when you hit the age of fifty. Though, it doesn’t.t means that you won’t be able to pay off the mortgage before the age of fifty.
What is the most substantial downside of paying off your mortgage early?
The most substantial downside of paying off your mortgage early is it will reduce your liquidity. Once you use all your money to pay the mortgage, you won’t be able to get the money back. So, think carefully before paying off the mortgage early will all your savings!
Last Updated on August 7, 2022 by Ana S. Sutterfield
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.