You now own your home outright after paying off your mortgage, which is a significant accomplishment. While this is a time to rejoice, you need also take particular action to confirm your ownership of the property and to continue handling your own homeowners insurance and property taxes.
What happens when your mortgage is paid off?
When you pay off your mortgage in full, you should hear from your lender, who will probably send you a cancelled promissory note, the instrument you signed when you first applied for a house loan and vowed to repay it. The paperwork that has been revoked attests to the fact that you have repaid the mortgage.
A certificate of satisfaction stating that you have no further mortgage obligations may also be given to you.
Many lenders additionally inform the county or city recorder that the borrower is now the only title holder of the home when a mortgage is entirely repaid. This procedure could take several weeks, so be sure the proper paperwork has been submitted and the deed has been fully released to you by checking with your lender and the local recorder’s office.
However, some lenders might hand you the documentation. If so, you’ll need to get in touch with your local recorder’s office to get the mortgage lien the lender put on your house removed.
Ask your lender about its procedures as you get close to the conclusion of your loan term to avoid difficulties, and be ready to take any necessary independent action. Although your lender might aid you in getting your deed, it is unlikely to help you with other unloading procedures like taking on real estate taxes and homeowners insurance.
Your lender put money from your monthly mortgage payment into an escrow account over the mortgage’s term to pay for your homeowners insurance and real estate taxes. If there is any money in escrow after your final mortgage payment, your lender will return it to you; however, you must let your insurer know that you’ll be continuing to make payments.
Additionally, it’s crucial to take your lender off of your homeowners insurance policy because any identified policy holder may be compensated in the event of accident or property damage.
It’s important to keep in mind when you have to pay your property taxes since, once your mortgage obligation has been satisfied, your lender will no longer make those payments on your behalf. Taxes are collected in some jurisdictions weekly, in others annually or semi-annually.
What Documents Should You Anticipate?
Your loan servicer may have an impact on the materials you receive. Here is what to anticipate, along with a list of documents that are required and those that you may do without.
Promissory note that has been canceled. The promise to pay something—in this case, a mortgage—is stated in a promissory note. It’s possible that you won’t get this document. If you have additional documentation demonstrating that you have paid off your debt, it should be acceptable if you don’t.
Trust deed or mortgage deed (a “deed”) A deed is a legal document that establishes your lender’s ownership rights to your house in the event that you cease making mortgage payments. When you pay off your mortgage, your servicer may or may not send you this additional document. It’s also possible that your servicer will only deliver it to the official records office where your deed was first filed.
a satisfaction certificate. Once you or your loan servicer produces official documentation of your loan being paid off, your local office of records (the county recorder, county clerk, or another department depending on where you live) will record a certificate of satisfaction. The price range for this service is $25 to $50. One of the fees shown on your loan payment statement can apply. You should save a copy of this document for your records.
Statement of final mortgage. Obtaining your final mortgage statement, which demonstrates that you have no outstanding principal, interest, or fee debt, is free and simple. Keep this one as well as proof of complete payment.
Letter of loan repayment. You can receive a formal letter from your loan servicer confirming that you have finished repaying your loan. Again, as long as you have other proof, it’s acceptable if they don’t.
You might need to get in touch with your loan servicer and speak with the lien release department if you don’t have evidence within roughly 90 days that the certificate of satisfaction has been recorded.
How to Pay It Off: Steps
Here is a brief explanation of what goes into making your last mortgage payment.
You should ask your mortgage servicer for a payoff estimate.
Follow any special instructions, such as paying via wire transfer, and make the final payment in the amount of the quote. A particular date will be the last day that your payout quote is valid, so make an effort to meet it.
Obtain proof of your loan payments in writing.
Ensure that the local government has a record of your payoff and obtain a copy of that record.
Is paying in advance a wise move?
Prepaying your mortgage can speed up the process of paying it off completely and saving you money on interest over the course of the loan.
But the more money you put toward your mortgage, the less money you have to spend on something that might be more profitable. Your home is a long-term investment with a relatively low return, despite the fact that it can have significant emotional benefits. Other investments, such as some mutual funds and dividend-paying equities, can offer better returns.
You can profit from the tax advantages for a longer period of time by delaying the repayment of your mortgage.
There are other ways to prepay your mortgage, including as paying biweekly, a small amount more each month, or occasionally making lump sum contributions.
If you do decide to prepay, make sure your lender accepts this type of payment schedule — some charge a fee for early repayment that might deplete your savings — and that the extra money is going toward the loan’s principle.