Paying off your mortgage involves a few important steps that are often overlooked. Check out my checklist to ensure a smooth transition to being mortgage-free, whether you’re close to paying off your primary home or an investment property.
1. Ensure Sufficient Funds for Final Payment
Before making your final mortgage payment, take time to review your payment dashboard for any potential fees or charges. The final payment typically includes your remaining balance as well as a fee for processing the necessary documentation. In some cases, although uncommon, lenders may impose an early payoff penalty or fee. Additionally, it’s a good idea to confirm with your bank if there are any wiring fees associated with sending the final payment to your lender.
2. Request Payoff Quote/Letter
Avoid paying the remaining balance directly through your portal, as the amount displayed may not include all fees required for a full payoff. Instead, use the option in your payment portal to generate a payoff quote or letter. This document will provide the exact final payment amount and detailed instructions on how to submit your payment. The letter will include specific wiring or mailing instructions that must be followed carefully to ensure your final payment is applied correctly. Failing to adhere to these instructions or paying directly through the portal may result in continued interest accrual, and your loan will not be considered fully paid.
3. Wire or Mail Remaining Balance
As mentioned earlier, your payoff quote or letter will provide specific instructions for submitting your final payment. The most efficient and secure method is to wire the remaining balance. Review your banking app for the wire transfer process and carefully follow the step-by-step instructions provided by both your bank and your mortgage lender. The transfer should typically be processed within a few hours. Be sure to keep your phone nearby, as your bank may contact you for additional details to ensure your funds are sent to the lender securely and without delay.
4. Verify “Paid in Full” Status and Cancel Automatic Payments
The next business day, log into your mortgage payment portal to confirm that your payoff has been successfully processed. You should receive a notification indicating that your mortgage is now marked as “Paid in Full.” If you don’t see this update, contact your lender to resolve any issues. Be sure to remove your banking information from your payment portal and cancel any automatic payments you had set up.
5. Update Your Homeowner’s Insurance Policy
Congratulations on paying off your mortgage! Now, it’s time to update your homeowner’s insurance policy. Contact your insurer directly or make the changes through your insurance app. Ensure that the mortgage company is removed from the policy as the payee, and update the information to reflect that you are now responsible for making insurance payments. Be sure to review and adjust your policy as needed to ensure your home remains properly covered.
6. Review Your Property Tax Payments and Set Up Automated Payments
Check your county’s treasurer’s office website to determine when your next property tax payment is due. As the property owner, you are now responsible for ensuring that your property taxes are paid on time according to the county’s payment schedule. To find your specific property’s information, you’ll need to enter your parcel or tax ID number, along with your name and property address on the county’s website. This will also allow you to view payment amounts and make payments directly online. To stay organized, add these important payment dates to your calendar and consider setting up automated payments if available, to ensure you never miss a deadline.
7. Keep Documentation Secure
Store all documents received from your lender in a safe and organized location for future reference. Additionally, your county treasurer will receive official documentation confirming that your mortgage has been paid in full, so it’s important to keep a copy of this as well for your records.
8. Celebrate
Paying off your mortgage is a significant milestone, whether it’s for your primary home or an investment property. With the mortgage behind you, you now have more financial freedom. Treat yourself to a special dinner, take a well-deserved trip, enjoy some ice cream, or simply do whatever makes you happy to celebrate this accomplishment. You’ve earned it!
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