What Happens After you Pay Off Your Mortgage

By Andy Towne, Plymouth Branch Manager

Congratulations! You did it. You paid off your mortgage. So, now what? Over the coming weeks, there are many things to be done so you can enjoy your home free and clear.

Deed of Trust and Note

If you remember when you originally signed your mortgage paperwork, there were two documents labeled the Deed of Trust and the Promissory Note. The Note set forth the terms of the agreement and the Deed was the vehicle by which the security interest, or lien, was filed at the county. In the coming days, you will be receiving something from your lender advising the Note is now paid in full.

Additionally, your lender will be sending a release of lien to the recorder of deeds to release the lenders security interest in your home. This should take place without too much involvement, but it would be wise to follow up with the recorder of deeds to check and ensure that this release gets filed.

Taxes and Insurance

Many mortgages have taxes and insurance included in their mortgage payment. Once your home is paid, it is important to realize that even though your mortgage has gone away, your taxes and insurance unfortunately have not. Though homeowners insurance is not required, once your home is unencumbered it is certainly advisable to continue your coverage with your insurance provider. There are a couple steps you must go through to ensure your policy stays in place and is set up correctly.

First, you want to call your provider and advise that your mortgage is paid off and to please remove the mortgagee clause from your policy.  The mortgagee clause covered your lenders interest in your home in the event of a catastrophic loss and no longer is needed.  Second, you will need to make payment arrangements with your provider to continue making payments if your insurance was included in your mortgage payment.

Additionally, you are now responsible for payment of your taxes to your municipality. It would be advisable to continue to set monthly or quarterly installments to ensure this obligation does not go unpaid. Depending on if you carried your mortgage to term or paid it off early there could be a balance in your escrow account with your lender and that check/refund will be coming to you in the coming days or weeks.  The monthly installments your lender set aside is your money, and the funds not used to pay your taxes and insurance will be sent back to you.

What Now?

Nobody’s financial picture is the same, but you should decide on what to do with your money now that you have more flexibility in your monthly obligations. This is a great time to sit down with your financial advisor and let them know that your mortgage is now paid and some adjustment to your retirement strategy could be necessary. If you do not have an advisor it may be in your interest to seek one out to begin to use your former mortgage payment to further your goals in retirement.

That’s it! Follow these simple steps, sit back and enjoy your home. You earned it!