What to Do After You Pay Off Your Mortgage

Buying a property, like a new house, with mortgage money can be a really big decision to take. You have to pay off the debts in equal monthly installments that may last for several years. In this modern era, life is unpredictable. There is no way for you to know what the future holds in store for you. In such difficult times, successfully paying off a mortgage can be a real big feat to accomplish. After all, who would not like to read the phrase “Paid in full” after paying off the last installment?

Most of you may wonder what your life will be like after you have successfully cleared off your mortgage payments. It is crucial for you to know that once you have paid off the last installment, you will receive several important documents in the mail. This is also the right time for you to take up some responsibilities now that the bank has no lien on your property. It is good to know that the exact process may vary that will be based on your individual state, mortgage type, and mortgage lender. There are several things to look for once your mortgage is cleared off.

Documents That You Receive After Paying Off the Last Installment

Most of you may wonder what exactly happens to the deeds once your mortgage is cleared off. Some of you may even wonder whether you receive the title to the new home officially. It is important for you to be on the lookout for a letter that the lender sends out to you once you pay off your mortgage. This letter should be accompanied by some primary documents that will be related to your loan.

Some of the Documents That May Get Released After Clearing of the Loan:

  • Your canceled promissory note
  • A statement that will show that your balance is paid in full
  • Your canceled deed or mortgage of trust
  • A certificate of satisfaction

When you opted for a mortgage for the first time, you had signed a promissory note. In this note you made a promise of paying back your loan within a set time frame at a certain rate of interest. For all future purposes and intents this is what will be referred to when you say that you are paying off a mortgage.

When you talk about a deed of trust or mortgage of trust, it basically refers to a document that gives your lender a legal interest in your property. Your lender will have to file this document with your local county or city office of land records once you opt for a loan.

Process of Getting the Deed to Your House

After you have cleared your loan your lender will have to return your original promissory note with the words “Paid and canceled” or something similar to this phrase. It will basically signify that you have successfully cleared off the debt.

Almost at the same time, your lender will also send a certificate of satisfaction to your county or city office. This will release your deed or mortgage and also update their own records to prove that you are the sole proprietor of your property.

It is important for you to know that there are some lenders who may not release your original documents. At the same time, there may be some who may take ages to release the original documents.

You should also be aware that your lender may send you the certificate of satisfaction either in addition or instead of your promissory note. If this ever happens, you will have to file it with the local records office personally. Whatever be the situation, it shall be your responsibility to clarify with the local office about your mortgage and whether it has been released by your lender. You also need to make sure that no lender holds lien on your property.

If your mortgage also included an equity line of credit:

  1. You may require to get in touch with your lender to request a termination of your loan agreement.
  2. Your lender may not cancel the mortgage, because you could still opt for a loan against your mortgage.

If you fail to receive your cancelled certificate of satisfaction or promissory note from the lender within a few weeks of clearing off the loan:

  1. Get in touch with your lender to release the documents.
  2. Receive and save the original documentation that is related to your loan and mortgage.
  3. Clarify with the local records office if your mortgage has indeed been cancelled.

Apart from getting in touch with the local records office, it may be needed that you run a credit report of yourself. This will be a second confirmation to the fact that no further outstanding mortgage is connected with your name. You may run your credit report free of cost once every year with each of the three primary credit bureaus.

After Paying Off My House What Am I Responsible For?

Once you have successfully paid off your mortgage and closed on your home, the lender will most likely ask you to agree to pay an additional amount every month. This will be the amount that was put into an escrow account to pay homeowners insurance premiums and proper taxes on your behalf.

After you clear off your mortgage loan, you will automatically become the sole owner of your property. Thus, you will have to handle all of these responsibilities on your own. Thankfully, your mortgage lender may ask you to pay an amount that will be marginally larger than required to fulfil all the bills. However, if any excess money was left in the escrow account, once you pay off the final mortgage installment, the lender will have to send you a check for the said amount.

Do make it a point to ask the lender if there was any additional amount left over in your escrow account. Also, ensure that you find out when you should expect to receive it. It is highly recommended that:

  • You deposit the refund into your bank account that will also work as your own monthly repository for any real estate expense.
  • Find out the amount that your lender deposits in your escrow account every month. Start storing an equal amount in your personal bank account.

This habit will actually save you from any future hefty tax bill.

Even After Paying Off Your House Do You Still Pay Property Tax?

Once your mortgage is completely paid off, no lender will submit property taxes for you. Thus, you will have to pay them on your own directly. It shall be pursuant to the property tax laws of the state or municipality where you stay or where the property lies.

It is good for you to know that counties and states have their individual real estate taxes that differ from each other. Some regions may require the payment once every year, whereas, others may require you to pay once every quarter.

It will not be a bad idea to do some research on the property tax laws of your region so that you can find out where and how often you need to submit the payments.

Update the Homeowners Insurance Policy

Once you are done verifying that your deed of trust or mortgage is indeed canceled, your next job will be to contact your homeowners insurance company. You need to inform them that you are the sole owner of the insured property and nobody else. This is a rather crucial step, since any named policyholder is qualified to receive a payment if you file a homeowner’s insurance claim.

If your home gets damaged and you need to file a claim, then a former lender’s name on the policy will result in the insurance company sending a portion of the claim amount to the lender. This will simply cause unnecessary frustrations and delays, especially if you have already paid a pretty big amount for repairs in anticipation of a reimbursement.

Apart from updating the name of the homeowners on your policy, you also need to ensure the following:

  • You need to cancel your present homeowner’s insurance policy.
  • You need to set up future premiums that will be deducted from your personal bank account.

It is needless to say that homeowners insurance provides a protection against any type of liability especially when someone gets injured on your private property. They also provide protection against a number of dangers that may cause large scale destructions to your home.

Without proper insurance, a dog bite or an accidental fall may leave you responsible for a pretty large lawsuit. Similarly, any other disaster, like a fire may leave you on the hook for the entire price of your home and all your personal belongings.

It is important for you to understand that such a loss may prove to be more than what you may recover from, especially if you are about to retire from work. Thankfully, there are several insurance companies that provide discounts for any significant milestones. This may include retiring or paying off your mortgage.

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