It comes as a big relief sending that last check to your mortgage lender. However, paying back your mortgage loan doesn’t end your financial obligations as a homeowner.
There are still property taxes and homeowners insurance to pay.
You must ensure your district knows that your home is now yours free and clear; and possibly most significantly, you need to figure out what to do with the dollars you no longer spend every month on your mortgage.
Here are eight essential things you have to do once you’re mortgage free:
- Obtain a statement of “satisfaction of mortgage.”
It would be best if you got this attestation from your lender that you’ve repaid your loan after your last payment, according to Jack Guttentag, Wharton School of the University of Pennsylvania’s professor emeritus.
Apart from that, your lender also has to provide you with a copy of your mortgage deed.
Guttentag suggests giving your lender a minimum of three weeks to send the statement and note before you call him/her to request it.
- Make sure that your mortgage documents are recorded.
If your lender doesn’t file the “satisfaction of mortgage” statement with the land registry in your district (or recorder of deeds office, as it’s called in some communities, you must do it yourself).
The majority of lenders will record the statement, but some wouldn’t. Call your lender and inquire.
- Stick to the rules of the lender if you want to repay the loan early.
Paying off your mortgage in advance may not be as easy as you might be thinking.
Various lenders make use of different rules for early payouts.
Some require that the final (early) payment be made by bank check, says Guttentag.
Others may charge a fee for the preparation of an official repayment statement. Or you may be asked to forward your concluding payment to another office.
Place a call to your lender to familiarize yourself with the rules before you send sufficient money to repay your loan early.
- Cancel the automatic deduction schedule.
If you’ve agreed to have your mortgage payments automatically deducted from your checking account and sent to your lender, make sure that your bank has disabled this option as soon as you’ve repaid the loan.
- Make sure that your homeowner’s insurance and property taxes continue to be paid.
If you’d made an escrow agreement with your lender, you made extra payment each month, so that your mortgage company would send your homeowner’s insurance and property taxes on your behalf.
Now that your mortgage is paid off, you’re responsible for these bills.
Get in touch with your homeowners’ insurance company and tax authorities to inform them so they can send these invoices directly to you, and you can begin making the payment yourself.
Furthermore, to ensure you’ve got adequate savings to cover these bills, call your insurance company and the IRS and ask how much you need to cover these bills, notes Dan Green, who is a loan officer at Waterstone Mortgage Corp. in Cincinnati.
“Then make a budget for it,” he adds.
According to Green, it’s better to leave 10% more in the bank than what you require to cover these bills.
“Tax and insurance bills often go up unpredictably,” he explains.
- Make sure that your trust balance is returned.
If you deposited into an escrow account, which your lender used for the payment of your taxes and insurance, you might have extra funds in that account after your loan is repaid.
Green advises that you look out for a check for the balance from your mortgage lender. It has to reach your destination in about three weeks. If not, don’t hesitate to call your lender.
- Inquire from your homeowners’ insurer if you should modify your coverage.
“Your insurer may be able to suggest a change in coverage that’ll save you money,” Green explains.
- Think about what you can do with the money that you could have used to pay your mortgage.
This could be the most critical idea of all when you retire your home loan.
Todd Tresidder, who is a Reno, Nevada-based financial coach and author advises that you start immediately by depositing the corresponding of your previous mortgage payments into an investment account to help you better manage your retirement years.
“It’s more about what you shouldn’t do after the mortgage is repaid than about what to do,” he explains.
“The trick is not to intensify your spending as you suddenly feel that you have cash. Once you start splurging that money, you’ll never learn to save it.”
With Gratitude and Love