From buying a home to paying it off, there are many stages of homeownership worth celebrating. Paying off your home is no easy task and often takes decades to do so, but what happens after you pay off your mortgage? In this blog, we will look at the process and the necessary paperwork so that you can claim your home free and clear.

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Approaching the Final Payments: What’s Next

As you approach your final payment, you should reach out to your mortgage loan servicer to receive a payoff quote. A payoff quote will detail the exact amount of principal and interest that needs to be paid as well as the target date to do so. If you pass the target date, it isn’t a big deal, but you will owe more interest.

In addition to your final mortgage payment, there may be some fees in addition to what you normally pay such as paperwork costs to show proof of ownership. You may have fees to pay if you paid off your mortgage earlier than the original term as well.

 

Documents and Paperwork

Like closing on a home, paying off your mortgage comes with a ton of paperwork. If you’ve recently paid off your mortgage, there are several documents that you should be on the lookout for from your lender:

  • Final Mortgage Statement shows that your mortgage has been paid in full including principal, interest and fees. Hang on to this to show proof of full repayment.
  • Canceled Promissory Note. A promissory note states that someone promises to pay something, such as a mortgage. Your lender may or may not give this document to you so as long as you have other proof of full repayment, you will be fine.
  • Certificate of Satisfaction. Once your mortgage has been paid in full, your local office of records such as the county recorder will record a certificate of satisfaction documenting that your mortgage has been paid in full. You may need to pay a fee for this service, or it may be noted in your loan payoff statement. We recommend getting a copy for your personal records as well.
  • Release of Mortgage is an official document that shows the lender has ownership right to your home if you cannot pay your mortgage. Like the promissory note, you may not receive your release of mortgage, but your lender will send the document to the county recorder for their records.
  • Loan Payoff Letter is an official letter from your lender detailing that you have paid off your loan.

Once the paperwork has been received, verify that your records have been updated in your local records office and receive documentation from them that your loan has been paid in full. You should receive proof of full repayment within 90 days of your certificate of satisfaction has been recorded. If you have not received any documentation, you should speak with your lender.

 

pay off your mortgage paperwork

Once your mortgage has been paid in full, your lender will be providing paperwork for your records.

 

Responsibilities After You Pay off Your Mortgage

Removing a mortgage payment from your monthly expenses is a huge weight off your shoulders. But your work isn’t done yet. After you pay off your mortgage, here are some of the tasks you need to take care of:

  • Cancel Automatic Payments
    • If your mortgage payments were on an automatic payment system, be sure to cancel the automatic withdrawal. While this should be canceled by the provider, we recommend double-checking so that you don’t make an extra payment and have to wait for a refund.
  • Request Escrow Refund
    • Depending on your mortgage lender, you may have been instructed to pay an extra amount of money each month that went into escrow to pay for property taxes and insurance premiums on your behalf. However, now that your mortgage has been paid off, your lender should provide a refund of the remaining amount. You should receive this within a month of paying off your mortgage, be sure to contact your loan provider otherwise.
  • Contact Your Tax Collector and Insurance Provider
    • If you had an escrow account that automatically withdrew funds to pay for taxes and insurance, be sure to contact your providers to let them know that you will be paying them directly. They should remove the loan servicer from your account and make sure that you are the primary contact.
  • Hang on to Title Insurance
    • Title insurance is an insurance policy that protects homeowners from past defects associated with the home’s title. Undiscovered title defects can pop up at any time so having protection will eliminate future problems.
  • Keep All Documentation
    • Owning a home comes with no shortage of paperwork. It is a good idea to keep all documentation related to the home including closing disclosures, home improvement costs, and your mortgage. These documents will be used to calculate income tax if you sell your home.
  • Save Money for Taxes and Insurance
    • Paying off your mortgage does not eliminate the costs of property and insurance so be sure to keep money aside to cover these costs. If your escrow account automatically determined a set amount for these costs, ask your loan provider for the amount so that you can continue to set aside money to cover these costs in your own accounts.

Now What?

After decades of allocating money to pay off your mortgage, you may be asking yourself, “What happens now?” This is a milestone worth celebrating and it is a perfect opportunity to designate extra funds toward other financial opportunities such as retirement or paying off debt. Not many people stay in their homes long enough to pay off their mortgage, so we congratulate you on the accomplishment.

 

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