Paying off a mortgage seems like a dream come true, but what happens next? You’ll still have to deal with property taxes, and you’ll still need home insurance to protect your assets. Here are a few important points to know when you pay off your mortgage.
Check if you have Received the Relevant Documents
After making your final mortgage payment, you can expect to receive several documents from your lender. A mortgage release, otherwise known as mortgage satisfaction, will verify that your loan has been paid in full and the bank has released the lien on your home. You may also receive a canceled promissory note.
Your lender then files a certificate of satisfaction with your county government, as the home’s deed is transferred to you. You should then confirm with the county that the lender has filed the necessary documents. Once this process is complete, you can consider yourself the sole owner of your home.
Update Your Insurance and Tax Details
Paying off a mortgage means you will no longer have a lender who requires you to carry home insurance, but it’s still a good idea. Regardless of the homeowners insurance policy you choose, you’ll need to update it to reflect that you’ve paid off your mortgage.
You will still be responsible for paying property tax to the county or other jurisdiction. If your mortgage lender handled an escrow account for you, determine if there are leftover funds that you are entitled to receive.
Allocate the Extra Funds to Good Use
What will you do with the extra money you have each month that was used to pay your mortgage?
Here are several ideas on how to put the money to good use:
- Pay your credit card debt: Some debt is good, but too much debt can restrict one’s finances.
- Create an emergency fund: It’s good to have a financial safety net in place in case you experience unforeseen expenditures.
- Make contributions to your retirement fund: Adding as much as you can each year toward your retirement provides security and comfort about the future.
- Invest the money: Investing in stocks, bonds, or other financial instruments can expand your assets.
- Build a savings account: Save up funds in a special account devoted to your long-term personal goals.
Manage Your Credit Score
Are there ways to save money on homeowners insurance? Yes, one of the most effective ways is to improve your credit score. Good credit scores show you pay your bills on time, which some insurance providers reward with discounts.
You’ll also need to check your credit report to ensure it confirms your mortgage has been satisfied. There may be a minor negative impact on your credit score when paying off your mortgage. However, if you maintain active credit and pay off other loans on time, it could help lower your insurance premiums.
Prepare Ahead for the New Phase
If paying the last installment of the mortgage is just months away, it’s time to prepare for the transition. Determine how it’ll impact your taxes and overall household budget, determine how your lender manages your documents, and how you’ll use the money once you no longer need to pay the mortgage bill.
Are you ready to pay off your mortgage and hope to save money on homeowners insurance? Contact our insurance experts at Pierce Insurance Group and find out how we can help you keep your insurance premiums affordable.
Also Read: 5 Simple Ways to Make Sure Your Home Is Never Underinsured
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