Paying off your mortgage is definitely a joyous time in your life. You now have one less major financial obligation and you now own your home free and clear. Of course you still have obligations as a home owner such as property taxes, maintenance, repairs, and of course home owners insurance must still be maintained. After you close out your mortgage you should of course notify your county that you own your home free and clear now. There are several other things to consider once your mortgage is finally paid off, which I will outline below.
Satisfaction of mortgage statement:
This should be the first thing on your to do list. You should receive this automatically after you have paid off your mortgage but there are cases where this does not happen. Your bank or lender should also provide you a copy of your mortgage note. If three to four weeks have passed and you have not received this important paper work do call your lender to inquire as to when you will receive them.
Make sure your mortgage papers are filed with the county:
While most lenders will file the satisfaction of mortgage statement with the county you live in some will not do so, in which case you will need to do so yourself. These papers should be filed with your counties register of deeds office or recorder of deeds office as it is sometimes called in some parts of the country. You should ask your lender when you close out your mortgage if they will be doing this on your behalf or if you need to do it yourself.
Most people have paid into an escrow account to cover their property taxes and homeowners insurance. It is very common for people to still have a positive balance at the close of their mortgage. You should contact your lender and inquire if you still have a positive balance and if so when you will be expecting the check to arrive in the mail.
If your mortgage was set to auto-pay do make sure that the bank has shut this option down, mistakes have happened in the past where this was left on. Needless to say this can cause quite a few problems.
Homeowners Insurance and property taxes:
Most people have these rolled into their mortgage. Now that your mortgage is free and clear you will be responsible for this. You will now need to contact the county and make sure they know to send you the property tax bill directly to you. You also need to contact your homeowners insurance company to have them directly bill you. You should also factor these both into your new budget. You cannot avoid property tax, although technically you can skip out on homeowners insurance I would not recommend that. Be aware that rates and taxes do have hikes so make sure you have about 10% more than this total cost in your savings account to adjust for any rate hikes.
Cheaper homeowners coverage:
Your bank may have required a higher policy than you actually need. This is often the case so you should contact your homeowners insurance company to discuss your current policy and what other options you have. Be sure to ask the specifics as to what any new plan may or may not cover then make an informed choice.
Now that your mortgage is paid off you will have substantially more care cash flow. You will need to figure out what you plan to do with your new found cash flow. I often advise clients to start investing this money and making this money work for you in what I like to call “putting dollars to work”. I also advise clients to put a portion of this money away into a rainy day fund for home repairs and the like. If you start spending it right away you may never break yourself from the habit, so I recommended starting to save some of it right away.