10 Financial Moves to Make After You Pay Off Your Mortgage

For many homeowners, it’s a dream come true: After making regular payments on your 15- or 30-year mortgage, you’ve paid it off in full and own your home outright. Whether it was your first mortgage or your fifth, take a moment to celebrate this huge milestone!

While this chapter of your financial life may be ending, the lifelong task of effectively managing your money goes on. So before you begin to tackle your post-mortgage future, here are a couple things to consider.

 

First, Should You Pay Off Your Mortgage Early?

First things first: If you can afford it, it may be tempting to pay off your mortgage early. But why rush? Mortgages are considered good debt, and if you locked in a low interest rate, you may be better off putting that money in a savings account where it can earn interest or pay down higher-interest debt. (Also, don’t neglect the potential benefits of the home interest tax deduction.) And though interest rates are a bit tumultuous right now, it may make more sense to refinance your mortgage than pay it off.

Now it’s time to get to work sorting out your new financial life. Here are the steps to follow.

 

Get the Right Documentation

If you pay off the mortgage, make sure you have a “satisfaction of mortgage” document (also called a “release of mortgage” or “release of deed”), which confirms you’ve paid off your mortgage in full and it’s no longer a lien on the property. While lenders often file this for you (and it can take weeks or even months), double-check that it’s done. In the meantime, be sure the lender sends a statement with your zero balance and a canceled promissory note.

Rethink Your Monthly Budget and Savings Goals

Remember: You’re free! Without the burden of your monthly mortgage payment, you may have more financial flexibility. Carefully consider how best to repurpose those extra funds, based on the state of your career and your goals for the future, including retirement. (Hint: Now may be the time to try bucketing your savings.) Will you pay down other debt? Double down on your savings and take advantage of compounding interest? If you need some time to reevaluate your new circumstances, park your newfound treasure trove in a high yield savings account while you make adjustments.

Cancel Any Automatic Payments and Transfers

The next step is to take care of some financial logistics; get ready to hit some cancel buttons. (It’ll feel good.) Were you making automatic mortgage payments each month? Cancel those. Were you automatically moving money from savings into checking to pay your lender? Cancel that, too.

Reroute Your Payments

If your lender rolled your homeowners insurance premiums and real estate taxes into the mortgage payment, you may have forgotten that these essential elements were part of the monthly total. Now that this structure is gone, of course, you’ll have to pay those bills directly. Not to worry. First, check whatever balance you may have in escrow and reclaim any funds that went unused, then set up new ways to pay for insurance and taxes.

Update Your Insurance Coverage

Your mortgage probably included a requirement to carry homeowners insurance. And while you’re now free of your mortgage payments—and the insurance mandate—the need to protect your home against damage and liability remains. In addition to ensuring that the policy doesn’t lapse, take some time to review your coverage and make sure it still fits the needs and budget of the new you.

Check In on Utilities and Other Payments

Your home is finally yours. What better time to make sure everything related to your castle is set up to reflect this new lease on life? So take a hard look at your monthly payments, including utilities and anything home related. Maybe it’s time to consider installing solar panels or to cut cable services you no longer need. In other words, think about anything that could give a boost to your income and/or your quality of life.

Look into a Trust

Thinking long-term is always smart, and it’s never too early to consider who you want to pass along your home to when you pass on. While not the right choice for everyone, putting your home into a trust could help avoid headaches for your heirs by allowing you to transfer ownership of your home without a lengthy probate process. A trust can also help to maintain your asset if you become incapacitated. 

Leverage Your Asset

Now that you own your home outright, it might be the right time to upgrade to your dream kitchen or re-landscape your backyard. Or perhaps some extra cash would help fuel your next career goal or pet project. If you decide to finance the effort, leveraging your home’s equity could help; take a look at securing a home equity loan or a home equity line of credit.

Check Your Credit

It’s always a good idea to do regular check-ins with the major credit bureaus, of course. And it’s especially important at this juncture, because paying off your mortgage can have an impact on your credit score. So check those reports extra carefully to make sure that the major credit bureaus have recorded your payoff and that you’re in good standing.

Be Up for Downsizing

Yes, yes—you just finished with your mortgage payments, so no one will fault you for reveling in the achievement. But consider your circumstances and take a look at the housing market; it might be a smart time to sell your now-debt-free house and move to a smaller abode. Sure, it may require starting the mortgage process all over again, but remember, it’s good debt—and you might come away with a nice chunk of cash.

 

 

Rich Beattie is a former executive digital editor of Travel + Leisure and has written for outlets such as The New York Times, Popular Science, New York Magazine and SKI.

 

LEARN MORE: Use the Synchrony Savings Calculator to help plan your financial future once you’ve paid off your mortgage and prepare for your later years.