Well over 60% of the American population owns a home. That number may come as a surprise to some given how popular the rental market has gotten, particularly in large, expensive cities like New York and Los Angeles.
If you're fortunate enough to be a part of the homeowner group, kudos to you. In reality though, you don't ever really own your home until your mortgage is paid off.
Therein lies the purpose of this what to do after you pay off your mortgage post!
Very few people talk about steps homeowners should take after they make their last debt payment. Below, we break that trend by sharing pragmatic steps you should move through to ensure your post home debt life goes smoothly.
1. Double Check Your Balance
Before you move through all of the steps we're going to share, you must double-check that your home is actually paid off. Some homeowners track their debt through third-party applications or on pen and paper which occasionally fall out of alignment with bank records.
The best way to check where you're at with your home debt is to log onto your bank's website or give them a call. Ensure that your home loan reads as $0.00, a negative figure, or has been removed from your account entirely.
If you notice a discrepancy, go to the bank in person with appropriate documentation to work through it.
2. Call Your Lender for Instructions
Every lender has a different way of handling home payoffs. Some will be proactive and call you to offer their congratulations once your property is paid off. Others won't do anything and will expect you to take the initiative.
To be safe, step up and let your lender know that you've paid off your home and that you'd like to know what's next. They'll walk you through when you can expect to see documents come in the mail from them that prove your payoff status.
3. Expect to Receive a Note of Debt Cancellation
Among the many documents you may receive from your lender, the most important will be a notice of debt cancellation. This notice will look different from lender to lender but should always have some sort of verbiage that describes your debt as "canceled".
If you do not receive a notice that explicitly states the cancellation of your debt, talk to your bank as not having this in your possession could create grounds for debt contention later.
4. Investigate Your Property Tax Obligations
Up to this point, your bank has collected property taxes on your behalf to satisfy municipality needs. Once you've severed mortgage ties with your bank, satisfying tax obligations will be on you to manage.
Talk to your bank to understand how much property taxes cost and who collects them. Then, set up accounts with collections bodies to ensure that you don't fall behind on what you owe in the future.
5. Call Your Home Insurance Provider
The same way your bank collected property taxes on your behalf, they also collected insurance premiums. To make sure that you don't experience a lapse in your insurance, call your insurance company after your mortgage is paid off.
Insurers will work with you to set up a new source account that they can withdraw their fees from every month. You may even be able to get a discount as some insurance providers offer savings to people that own homes free and clear.
6. Plan on What You'll Do With Your Extra Money
You've received a notice of debt cancellation and have set up payments for both tax and insurance collectors. Now what?
At this point, the most important what to do after you pay off your mortgage step you can take is to think about what you'll do with your extra money each month! A few suggestions we have include:
Pay Off Your Other Debts
Paying off debts can become an addition after you get the ball rolling! With the extra money you're pocketing from being mortgage-free, consider knocking out car debt, credit card payments, and more.
You'll love the feeling of not owing anybody anything.
Start a Home Emergency Fund
Broken pipes. Leaky roofs. Ruined carpets... These are all things homeowners run into that can set them back thousands at the drop of a hat.
Get ahead of those expenses by putting a portion of your mortgage savings into a high-interest savings account each month!
Tackle a Home Renovation
Not having a mortgage to worry about makes paying to spruce up your house easier than ever! Consider building a deck, a bedroom, or redoing your kitchen.
Now that you own your house outright, the things you can do with your property are limited only by your imagination and local regulations.
7. Understand Your Equity Availability
While we're not advocating that you run out, find mortgage brokers and take out another loan against your house, knowing that you can do that is important. Being an outright owner of your house means that you own all of its equity.
You can typically borrow against about 80% of that value if you're in a pinch!
You Now Know What to Do After You Pay Off Your Mortgage
Understanding what to do after you pay off your mortgage can seem convoluted and tricky. We hope that our insight has given you some much-needed guidance.
Should you find yourself in need of more advice pertaining to real estate, we welcome you to check out more of the helpful content on our blog!