The Golden Years, With a Paid-Off Mortgage

Image of a house near a small lake with trees and mountains in the background all with a light dusting of snow. Captioned: The Golden Years, With a Paid-Off Mortgage

We’ve talked about scams, and the risks that can be involved in delegating a power of attorney to another person. Now, let’s uplift the mood. Visualize the day you submit that very last mortgage payment.

Congrats! Your debt is satisfied.

Your certificate of satisfaction can now be recorded in the county where your home is. If your home is in a deed of trust state, the deed of trust now comes off your title. A deed of reconveyance is the deed of trust state’s equivalent to the deed of release of mortgage.

Within 20 days after your final payment, the lender will refund any reserves held to cover your insurance and property taxes, and close the escrow account.

Now, your financial load is lighter. With no mortgage to pay, more of your money is available for other plans.

From this day forward, there’s no lien on your home. So you’ve also resolved one of the biggest risks in your retirement plan.

Documents, Insurance, Taxes, Dreams… Check!

Here’s what to watch for after you’ve submitted that auspicious final payment.

  • Three to four weeks after payoff, look for your certificate of satisfaction in the mail, and a statement showing your balance of—drum roll, please—zero.
  • Check to see if your lender files a certificate of satisfaction with your county government. If your lender’s office does not handle this, submit a request to the county to release the mortgage lien from your title. Expect to pay a fee for this service.
  • Then, obtain your copy of the recorded release from the loan servicer or the county recorder.
  • You’ll still receive tax statements for your property. From now on, you will pay the taxes directly to the local treasurer’s office. If you pay your full property tax bill at the start of the year, you may receive a significant discount. 
  • Inform your home insurance provider that there is no longer a mortgage lender on the policy. Now, you control your policy. Set your payment page up to automatically pay the premiums from your account.

Take a look at your credit score, too. It’s normal for scores to take a small dip after one scheduled loan repayment leaves the mix.

Speaking of credit, this is a great time to pay off any credit card debt. You can take the opportunity to make major purchases that you might have put on credit when you had mortgage payments due. Assuming your cash reserve is healthy, this can also be a time to turn lifelong goals—family time, travel, scholarship, creative pursuits and dreams—into realities.  

Conundrum: Paying the Mortgage Off Early 

Should I, or shouldn’t I? It’s a perennial question. The answer is: It all depends. Yet there are clear pros and cons. See which one best suits your situation.

Why It’s Fabulous to Pay Off the Mortgage Early

For priceless peace of mind (or if you’re thinking of selling), pay off your mortgage early. If you’re one of millions of people who take a standard deduction at tax time under today’s large allowance, you won’t lose the benefit of mortgage interest deductions.

In some states, your early payoff will qualify you for a higher homestead exemption, shielding more of your home equity from potential judgment creditors. Do you have any concerns about potential litigation? Have you just turned a hobby into a small consultancy business, for example? Then you have extra exposure to liability, and reasons to protect your home from judicial orders. You also need to protect yourself against unexpected medical debt. So, check the homestead exemption in your state, and consider the ramifications.  

Life throws the unexpected at us, and peace of mind might be the controlling factor for you. All things considered, paying off the mortgage relieves you of several sources of financial stress.

Why It’s Wonderful to Leave Your Mortgage on Its Regular Timeline

On the other side of the coin, a mortgage has a low rate of interest. You might opt to leave your mortgage on its normal timeline, and put any extra money into stocks, which have, in recent years, fetched better returns than savings from the typical early mortgage payoff. There’s a big X factor here, of course, and that involves how the market performs in the coming years. No one has a crystal ball.

During periods of inflation, a fixed-rate mortgage becomes especially cost-effective. 

Another benefit to letting your mortgage play out normally is access to more money in your accounts. This follows a basic rule of investing: diversification. Should real estate values take an unexpected drop, it’s good to have other sources of wealth. And you may need to turn to your cash reserve for life’s other unexpected twists and turns. An ample reserve will keep you from having to try to access your home equity or take on an additional loan.

So, it all depends. Paying the mortgage faster boosts home equity, whereas cash is a liquid asset. Both are valuable, and each is more valuable to some homeowners than to others. 

The Main Thing: Planning Ahead

Are you near the end of the tunnel on your mortgage? There’s no time like the present to call your lender and get ready for the transition. Your lender may offer some helpful advice on reducing your remaining interest, by knowing just when and how to make that final payment. Learn how your lender handles your certificate of satisfaction. Plan out your taxes and your insurance payments. Decide how you’ll reallocate your spending. 

Golden. It’s the perfect word for the time when you own your own place, free and clear of the mortgage company’s lien. Enjoy.