Once you have made the last payment on the mortgage on your home, there are still matters which need your attention. Below is a list for your consideration.
1. Satisfaction of the Mortgage
If your mortgage loan is paid off by a title company, they will usually receive the documents necessary to cancel the mortgage. If you make the final payment and receive a “satisfaction of mortgage” from your lender, DON’T BURN THE NOTE! If you want to celebrate the final payment, make a copy to burn. The original will be needed to file with the Clerk of Court in order to properly cancel the mortgage from the records. State law gives the lender up to 60 days to send you or the title company the cancellation documents.
2. Automatic Deductions
Remember to cancel auto-draft payments you set up from your checking account. The lender does not send your Bank a notice that the loan is paid in full.
3. Insurance and Taxes
After all these years, you will now have to pay taxes and homeowners insurance. You are no longer making payments into an escrow account. Call your insurance company and let them know that you have paid off your mortgage and you will now be making payments for insurance. You may be able to set up a quarterly or semi-annual payment plan, and you may be able to change coverage to save you money. You also need to make sure that you obtain tax bills each year and pay the amount due to the Sheriff. Most Parishes now have an online payment system.
4. Escrow Balance
More on that escrow account. When you make a full and final payoff on the mortgage, if you had a required escrow account, then you should expect a refund from the lender for the amount in the escrow account for taxes and insurance. Look at your last statement the balance of the escrow account is often given on the monthly statement. By Federal law the lender has 30 days to account to you for the amount in the escrow account. Some lenders may have applied the balance of the escrow to your payoff so you would have already received the refund.
5. More Available Disposable Income
What do you do with the money you used to pay on the mortgage? Financial planners suggest that you immediately start depositing your former mortgage payments into an investment account to help make your retirement years better ones. Don’t increase your spending because you suddenly feel that you’re flush with cash. Once you start spending that money, you’ll never learn to save it.