No longer having a mortgage is hugely liberating. Lots of people work with all of their lives taking into consideration the moment they truly own all of their home. But if you've always been centered on becoming mortgage-free, what comes afterward can seem to be like uncharted territory.
In fact, there are a few final steps you need to take before you pop that bottle of celebratory champagne. Namely, there are many administrative tasks that you will have to deal with, which range from obtaining certain documents, determining how to handle the extra money you're not using for mortgage payments, and much more.
The exact post-mortgage process will vary based on your lender, your loan type, what state you live in, and other factors. But there are still a few general steps you will need to take. Continue reading for all you need to learn about what happens once you repay your mortgage.
Paperwork
There's lots of paperwork involved with paying down a home loan. It's important to hold onto these documents and them organized in a safe place.
When you finalize paying off your mortgage, you should get a statement indicating you have paid the loan balance entirely. Other paperwork you should receive includes:
A Canceled Promissory Note
When you first took in your mortgage, you signed a promissory note. This implies that you agree to the the loan (monthly obligations, interest amounts, etc.).
A canceled promissory is really a copy from the original with something along the lines of “Paid and Canceled” onto it. This shows that your lender acknowledges that you have satisfied your debt.
A Certificate of Satisfaction
Your lender will even send certificates of satisfaction. Some lenders will be sending it to your local government. If this sounds like the case, your local government will update its records without you having to do anything whatsoever. You'll receive your deed and officially be the sole who owns your home.
Note that some lenders may send the certificate of satisfaction straight to you. Should this happen, you'll need to file it with your local government yourself.
Timeline for Receiving/Filing Documents
The process of receiving and filing documents can take a while. There are received any documents inside a few weeks, contact your lender and ask for them to be released.
After per month or so, seek advice from the local records office to ensure that they filed the certificate of satisfaction. This can make sure that your mortgage is canceled and that your lender will no longer have a lien on your property.
Check Your Escrow Account
When you are taking on a mortgage, your lender opens up an escrow account for you. They deposit a portion of your mortgage payments into this account. Then, they will use these funds to pay for your insurance premiums and property taxes on your behalf.
When you have to pay off your mortgage, there might be money remaining inside your escrow account. Contact your lender to ascertain if there's a remaining balance. When there is, they will give back a refund check!
Take on New Financial Responsibilities
Being mortgage-free means you can get your escrow account's remaining balance. Additionally, it means that your lender will no longer look after your insurance costs and property taxes.
As the sole owner of your house, these responsibilities fall you. You need to put aside enough money each month to pay for these expenses.
Homeowners Insurance
Lenders need you to have home insurance. Once you are your home's sole owner, you don't necessarily need your policy anymore.
However, maintaining an insurance policy will help you protect your assets. After paying off your mortgage, be sure you update your policy together with your current information. This will permit you to successfully file claims should you ever have to.
Property Taxes
Homeowners insurance isn't mandatory, but property taxes definitely are. Since your lender is not paying them, you'll have to outlay cash yourself.
Contact a state, county, and native authorities and have them send your tax invoice straight to you. Depending on where you live, you'll have to make payments either annually or quarterly.
Figure Out How to handle the additional Money
In the U.S. an average monthly payment for a 30-year fixed mortgage is $1,275. This can be a lot of cash that you will not be putting towards mortgage payments. But what should you use it?
Here are just a few smart moves you can make with this extra money:
o Repay other debts. You may be mortgage-free, but you likely have other debts you still have to pay off. Work towards being 100% debt-free by paying off your vehicle payment, credit card bills, student loans, etc.
o Construct your emergency fund. Everyone must have an emergency fund equal to at least Six months of their bills. If your emergency fund is lacking (or even nonexistent), its time to build it. This will give you financial security when unexpected expenses cross your path.
o Place it towards your savings goals. Everyone has savings goals. Maybe you're hoping to go on a dream vacation or save up for your kid's college tuition. In any case may be, the extra money can help make these goals a real possibility. Make a savings plan with this particular extra money.
o Renovate your home. Now you fully own your house, you might have the itch to start making updates and repairs that you've always wanted. And remember that renovations aren't just for you-they can also increase the general worth of your house when the time comes to market.
o Invest. Make your money work for you by investing it. You can atone for your retirement savings or try to go to shorter-term investment options.
Don't Get up to date within the Excitement
Being mortgage-free is exciting. But it's vital that you not neglect your new responsibilities as a homeowner.
Mortgage-free homeowners tend to make some common mistakes, including:
o Neglecting to get the proper paperwork
o Leaving the rest of the balance inside your escrow account unclaimed
o Neglecting to pay for your home taxes
o Not updating your homeowners insurance
o Being frivolous together with your new-found extra cash
If you are looking to renovate after paying off your mortgage, contact us right now to find out about your loan options. We can help you get those new countertops or flooring, refinish your basement, redo your bathrooms, and more.