4 Things You Should Do When You Pay Off Your Mortgage but Did Not Sell Your Home

First of all, Congratulations! Paying off your mortgage is a big event. Signing the check for that last payment is every bit as exciting as signing the papers to buy that first house. But, sometimes, it can also be just as stressful. Below are 4 things to consider after you’ve made that final payment.  

1. Make sure the lien on your property is canceled. When you signed the loan documents, you signed a Deed of Trust. That document gave your lender a lien against your property. Now that you have paid it in full, your lien must be canceled. If it is not canceled and you decide to sell or borrow against the property again, the lien will still show on the title search and it may be costly and time-consuming to track down your lender (or its successor, if it has gone out of business) to get the lien canceled down the road.  It is your bank’s responsibility to send the cancellation or release documents to the county Register of Deeds to cancel the lien. In North Carolina, a lender has 60 days from the date the loan is satisfied to file the cancellation documents.  If the cancellation documents have not been recorded within the sixty days, or if they refuse to file it altogether, you should see your attorney. Your attorney will be able to advise you on the next steps to take to make sure that the lien no longer appears of record.


2. Update your insurance. When you took out your loan, the bank may have requested that your insurance company name them as an additional insured on your homeowners' insurance. This is normal and would protect the bank if something catastrophic happened to your property while they had an interest in it. However, once you have paid your loan in full, you are free to remove them as an insured. Doing so ensures that if something should happen to your property, you end up with the insurance proceeds without involving your previous lender. As an added bonus, updating your insurance will give you the chance to evaluate whether the policy you have is right for you. Your lender may have had certain requirements for your policy that you may want to add to, remove, or change such as coverage limits or deductible amounts. Your insurer will have the opportunity to reevaluate your needs and recommend any coverage changes.  


3. Plan to pay your taxes and insurance. If your monthly loan payment included an escrow payment, then your lender has been paying your taxes and insurance on your behalf through the life of your loan. This was convenient for you and the lender – you did not have to come up with lump sum payments once a year and your lender knew that these items were taken care of. However, now that you have paid your loan in full, these items become your responsibility again. You should call your local tax office and your insurance company to get an idea of how much these bills will be so you can budget accordingly.  It is important to remember that you may be entitled to a refund of the cash left in your escrow account as well. Your lender should send you a check for this after your final payment has been processed. If you have not received it within a few weeks of sending your final payment, be sure to check with your lender and request the refund if necessary.


4. Make an appointment with your financial planner and your attorney. Paying off your mortgage is a big step and is not something you have to navigate alone. Your financial planner will be able to help you figure out the best way to manage your increased discretionary income and how to budget for the insurance and tax payments you will be taking over. Likewise, your attorney can help you make sure your lien is satisfied and that you are on the right track if you decide to sell your property or borrow against it in the future.