Amy Fontinelle is a freelance writer, researcher and editor who brings a journalistic approach to personal finance content. Since 2004, she has worked with lenders, real estate agents, consultants, financial advisors, family offices, wealth managers.
Amy Fontinelle Personal Finance ExpertAmy Fontinelle is a freelance writer, researcher and editor who brings a journalistic approach to personal finance content. Since 2004, she has worked with lenders, real estate agents, consultants, financial advisors, family offices, wealth managers.
Written By Amy Fontinelle Personal Finance ExpertAmy Fontinelle is a freelance writer, researcher and editor who brings a journalistic approach to personal finance content. Since 2004, she has worked with lenders, real estate agents, consultants, financial advisors, family offices, wealth managers.
Amy Fontinelle Personal Finance ExpertAmy Fontinelle is a freelance writer, researcher and editor who brings a journalistic approach to personal finance content. Since 2004, she has worked with lenders, real estate agents, consultants, financial advisors, family offices, wealth managers.
Personal Finance Expert Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
| Loans & Mortgages Editor
Updated: Jul 26, 2023, 1:15pm
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After you pay off your mortgage, you might gain a newfound sense of pride in your home. You really, truly own it. You’ll likely have extra money every month and face a much lower risk of losing your home if you fall on hard times.
You may need to do more than make your final mortgage payment to finalize your new free-and-clear ownership status. Learn more about what’s supposed to happen when you pay off your mortgage to make sure you’re fully off the hook.
Before you can make your final mortgage payment, you’ll need to ask your loan servicer for a payoff quote. You can often do this through the servicer’s website while logged into your home loan account. If not, you can call them. Have your loan number handy. You’ll find it on your mortgage statement.
The payoff quote will say exactly how much principal and interest you need to pay to own your home free and clear. It will also provide a date for when you need to pay it off. If you take longer, it’s not a big deal. You’ll just owe more interest.
You may have to pay some fees with your final mortgage payment that are often meant to release final paperwork, like proof to the county that you now own the home. But there can also be fees if you’re paying off the loan earlier than the original term.
If you decide to make extra payments on your mortgage, it’s important to tell your lender to direct those funds to the principal balance of the loan. And ask your lender ahead of time what fees you might incur when paying off the rest of your loan.
Your payoff statement should also note whether you need to make your final payment via wire transfer, bank check (cashier’s check) or certified check, any of which will incur a small fee. If it doesn’t, ask whether a personal check or ACH transfer is acceptable.
The documents you receive may depend on your loan servicer. Here’s what you can expect, which documents are essential and which ones you can make do without.
If you don’t have proof within about 90 days that the certificate of satisfaction has been recorded, you may need to contact your loan servicer and speak with the lien release department.
Here’s a quick summary of what’s involved in making your final mortgage payment.
Your credit score is unlikely to change much after paying off your mortgage. Your payment history and amount owed have already been factored into your credit score for years.
However, if you’re paying off a large lump sum (maybe you got an inheritance or life insurance settlement), the effect on your credit may be more noticeable. Your amounts owed, as shown on your credit report, will suddenly be much lower, and that metric is a big component of your credit score, accounting for about 30% of it. In that case, you might see a nice bump. But if you already have excellent credit, the effect may be negligible.
You also should check your credit report after 30 to 60 days to make sure it shows your mortgage was paid off. You can get a free credit report from each bureau every 12 months at AnnualCreditReport.com.
As with most financial decisions, there are two sides to paying off your mortgage in full. While doing so has obvious benefits, there are also reasons why you might want to direct extra money to other parts of your budget.
Unfortunately, collecting mortgage paperwork isn’t the only task you’ll need to handle. Here’s what else you’ll need to do after paying off your mortgage.
There are several ways to pay off your mortgage early.
You’ve probably already been daydreaming about how you’ll use that extra cash every month. But if you need some ideas for how to use the money that’s no longer going toward a monthly mortgage payment, here are a few.
Once your mortgage is paid off, you might have room in your budget to focus on other financial priorities. You may be able to pay down other debt, save for retirement or splurge on luxuries.
However, paying off your mortgage isn’t the end of your house-related bills. You’ll still need to pay property taxes to avoid a foreclosure and you should keep your homeowners insurance in effect to guard against unforeseen disasters. Maintaining a dedicated fund for repairs and upkeep is also important.
If you need extra money in the future, you can tap into a paid-off property using a home equity loan or line of credit. But for now, revel in the fact that you have one less bill to pay and that the roof over your head belongs to you free and clear.
Perhaps the most compelling reason not to pay off a mortgage early is that it might be better to put that extra money into stocks, a high-yield savings account or a certificate of deposit (CD).
For instance, if your mortgage has a 3% interest rate, but you could earn 5% in a CD or 7% in a mutual fund, then you would come out ahead by investing your money. The problem is that many investments don’t provide guaranteed returns so it can be hard to say with certainty which option is better.
When weighing the decision to pay off your mortgage or invest, consider the following:
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