Congratulations, you’ve paid off your mortgage! That’s a huge accomplishment. What I’m not talking about is what to do with the money, because you may have thought of a thousand ways to spend or use it. Instead, I’m talking about what you need to do now that you’ve paid off your mortgage.
What is your next step? I have those steps and more on the way stay glued
People also have the goal of paying off their mortgages, which is just as important. I can tell you that more and more people are going after their mortgages these days, not because it makes the most financial sense or because interest rates are so low, but because they have extra money lying around.
Options for what to do with the extra money
Here, maybe I was planning on taking a vacation, remodeling my house, or doing something else, but now doesn’t feel like the right time to do either of those things. So, what do I do with this extra money?
Also, some people look at the stock market and think, “Wow, these prices are high and there’s been a lot of volatility. I have some extra money; should I throw it there? No, maybe I’ll just cut that,” so it’s important to know which of those three options — delaying spending, putting it on a mortgage, or investing it — is best.
Mortgage or putting it in the stock market, are both good options. Your overall financial plan will tell you which option is the best. your detailed plan for the money is Okay, so your CFP looks at all six parts of your financial life and says, “You could do this, you could do this, you could do this, and those are all good.”
Here this is the best thing for you. If the best option is to pay off your mortgage, that’s great! That’s great! Work hard to get that done. Once your mortgage is paid off, what do you do? I’ll give you some steps. go celebrate Nah I’m just kidding with you.
1. Get proof of having paid off your mortgage
Well, you should celebrate every big financial goal you reach. If you never celebrate, you’ll never celebrate. But after that, keep an eye on your mailbox. You need to get proof of having paid off your mortgage from your lender, bank, or other institution that held it.
When your mortgage is paid off, you will get a “satisfaction of mortgage” statement. Sometimes this is just a “paid in full” statement. You should also get a copy of your original mortgage note or promissory note that is stamped and says “paid” or some other way to show that your mortgage is paid off this is so important as it serves as a piece of evidence.
Not only a notice that your balance is now zero, but also a notice that the bank or creditor has released you and that the mortgage they held on the property is now paid off and canceled. This is what you’ll be looking for in the mail, and you should get it within a couple of weeks of paying it off.
if you haven’t already, you should call your mortgage lender and ask, “Hey, what’s up with this? Did everything go the way it was supposed to?” Then, you need to make sure that this “satisfaction of mortgage obligation” is filed with your county. Many banks and lenders will do this for you when they send you a statement saying, “It’s been paid off.”
You’re good Even if they send a copy to the county, it’s still your job to make sure that your lien is removed from your property on your county record card. Otherwise, if someone asks if it got lost in the mail, you can say that it was your fault.
If someone put it in the wrong file or it wasn’t processed correctly, it could be a long time before you try to sell the property and find that it has a lien on it because the lien wasn’t released. Before you can sell the property, the county will want to see proof that no one is trying to get their hands on you for money.
So, yes, most banks do this, and the county will probably confirm that they got it and you’re good, but I’d put it on you to call or go to the county once you get your letter to make sure they’ve updated your property and removed the lien while you’re there.
2. while you’re there, make sure your property taxes are set up to be sent to you instead of your lender.
If you were set up for escrow, which most people were, the bill should be sent to you instead of your lender. So, since you’re already there, kill two birds with one stone and make sure that not only is the lien released, but also that your property taxes are set up to be sent to you.
But the county should automatically say, “Liens released, no more escrow, bam, we’re going to direct bill for property taxes, mailing it to the address of record,” and you should confirm while you’re there that they’re set up to send their property taxes directly to you so you can pay them automatically.
3. Just like you have to make sure your taxes aren’t in escrow anymore and that you get the bill.
you have to call your homeowner’s insurance company and set up the same thing for your homeowner’s insurance. there are two reasons you should talk to your insurance agent: If you’ve had a mortgage, your independent insurance agent number one is listed on your homeowner’s insurance policy.
That lender is listed as a lien holder on your mortgage as well as on your homeowner’s insurance. This is because if there’s a total loss or a big loss, they’re saying, “Hey, we’re at risk, too. We need to get our money back, the money that we’ve loaned to this homeowner.” So, now that you’ve paid off your mortgage, you’ve got to make sure that the lender is still protected.
To update, you’ll need to have your insurance agent do it. To remove that lien holder, you’ll need to remove that lender from your homeowner’s policy. For property taxes, you’ll need to tell your insurance agent to stop sending the bill to your bank for escrow and send it directly to you. Then you can confirm the amount.
And you can find out when they’ll bill you since you’ll now be responsible for making that payment instead of letting it go through escrow.
4. Get a refund and a full statement of your escrow balance
Next step is to keep an eye on your mailbox. You should get a refund and a full statement of your escrow balance, assuming you did escrow your mortgage and most people do.
People do this, which means that every mortgage payment you used to make had four parts: principal, hopefully, a lot of interest to the bank, escrow, which was money set aside for your property taxes and homeowner’s insurance, and a balloon payment. when you stop making your mortgage payments, you no longer have principal and interest, but you still have to pay property taxes and homeowners insurance. If you have a balance in your escrow, they’ll send you a check and a statement saying, “Okay, here’s the balance of your escrow.”
5. An escrow account:
and after that Here’s how we came up with this number, and here’s what I’d do: I’d put that money into what we call a “delayed spending account,” which is separate savings account you can use as your own “escrow account.” This is where you save money in advance so that when your property tax bill comes, you’ll have enough money to pay it.
When your homeowner’s insurance bill comes, you have the money to pay it. It doesn’t stress you out. So when you’ve gone to the county and found out how much your property taxes are (you probably already knew this for your income tax), and when you’ve talked to your homeowner’s insurance agent and found out how much and when you have to pay, you’re ready.
You now know how much you need to put into your escrow account every year to pay for your homeowner’s insurance. You can divide this amount by 12 to find out how much you need to put into your escrow account each month. This way, when bills come due, you won’t have to worry about paying them.
Financially, you need to talk to your CFP to find out if your taxes will go up now that you don’t have a mortgage. Taxes mean a lot of different things. I’m talking about two different taxes. The first is property taxes. If you have a mortgage, check with your certified financial planner because some counties and states let you take a small amount off your property taxes.
In the county I live in, if you have a mortgage on your home, your property taxes are reduced by $50-$100. If you don’t have a mortgage, your property taxes might go up a little bit. However, in some counties, including the one I live in, if you have a home equity line of credit, you technically still have a lien on your home.
You still technically get that deduction from your property taxes, so check with your cfp to see if your property taxes will go up because you no longer have a mortgage or if there’s a way to keep those taxes at the same rate. You’ll also want to check with your cfp to see if your income taxes will go up.
Why not talk about a state or local income taxes? I’m talking about federal income taxes. If you itemize your deduction, which has helped you, one of the itemized categories is mortgage interest. Since you’ve been paying your mortgage aggressively all along, the amount of interest that you owe is probably less than it would have been if you hadn’t been paying so much on it.
You’ve had to pay less and less in interest, and the amount you can claim on your taxes goes down and down, so this probably won’t have a big effect unless you still have a big mortgage, like $50,000 or $100,000, and you make a big payment on it. Then, all of a sudden, you were paying a lot of interest, but it’s gone.
6. Make a good decision of your money.
You’re itemizing your taxes, which could change the amount of income taxes you pay, so you’ll want to be ready for that as well. The sixth step is my favorite, and you’ve probably thought about it a lot: “What am I going to do with this money?” I’m going to encourage you to make a good choice.
There are a lot of good options: going on vacation, buying a hot tub, saving up for the next house, putting on a new roof, saving for retirement, doing a Roth account, or maxing out your hsa, for example. helping the kids pay for school Getting money to help the kids pay for college I don’t know what it is, but there are lots of good things about it.
Choices are out there Knowing the great one or ones comes at the intersection of all six areas of your financial life, and your cfp is right there with you looking at each one. As a fiduciaries, they won’t just tell you to invest it with them and write a check. Instead, as a fiduciaries, they’ll say, “Listen, with these extra dollars and the goals you’re trying to reach, here’s what you should do.”
To do this, here are the one, two, or three places we need to put this money so that you can get the most out of your money. Talk to your certified financial planner about this, and hopefully, you’ve already done so before deciding to pay off your mortgage. It’s a big goal of mine to do the same thing.
I hope you’re also working hard toward it, and I hope these steps help you so that when you reach that goal, you know exactly what to do and aren’t caught off guard by forgetting one of these steps. work with your certified financial planner. If you don’t have a cfp on your team, you can contact one on my team. You can find us online at corehorn.com.
The financial benefits of paying off a mortgage:
There are several positive financial outcomes that might result from a mortgage being paid in full. Among the many benefits that stand out as particularly noteworthy are:
- Once a mortgage is paid off, the homeowner no longer has any outgoing monthly payments to make. This will help them save money each month, which they can then put to better use.
- The monthly mortgage payment can be a significant financial drain on homeowners, limiting their ability to prepare for retirement, participate in the stock market, or take on other financial commitments.
- Paying off a mortgage can boost a homeowner’s credit score, making it more likely that future loan and credit card applications will be accepted.
- Homeowners who make their mortgage payments over time increase their stake in their property. When a mortgage is paid in full, the homeowner has full ownership and ownership equity in the home.
- Finally being free of a mortgage payment can be a huge weight off a homeowner’s shoulders, allowing them to relax and enjoy their newfound freedom. Having paid off their mortgage, they may relax in the knowledge that their home is truly theirs and not just a rental.
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