MORTGAGE MATTERS

2 min read

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Jul 2024

What Happens When I Pay Off My Mortgage Loan?

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WHAT YOU'LL LEARN

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What documents you’ll receive to review and sign.

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What bills you’re now directly responsible for.

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Ideas for that extra monthly money!

Check

WHAT YOU'LL LEARN

Checkmark

What documents you’ll receive to review and sign.

Checkmark

What bills you’re now directly responsible for.

Checkmark

Ideas for that extra monthly money!

You’re about to pay off your mortgage – congratulations! But there are a few final steps to take to ensure your home is officially yours. Here’s what to expect next. 

Mortgage Release Documents 

Once you’ve made your final payment, your lender or loan servicer will send you a set of documents the officially release you from your loan and remove the lien on your home. Typically, documents will include: 

  • Canceled promissory note: The note you signed at closing stating you would pay the loan back.  

  • Loan payoff letter: A document showing you don’t owe anything more on the mortgage.  

  • Deed of reconveyance: A lien release stating the lender has no legal interest in the property. 

  • Escrow funds: A check for any remaining money in your escrow account. 

  • Property deed: A document proving you are the sole property owner. 

  • Certificate of satisfaction: A document from the local clerk showing you’ve paid off your loan. 

It’s a good idea to call your local clerk’s office to confirm they’ve received the necessary documentation from your lender to prove the home is yours.

Update Your Insurance and Taxes 

Your monthly mortgage payment likely had your property taxes and homeowners insurance rolled into it, paid from an escrow account. Now you’ll need to handle those yourself. 

If you want to keep your current insurance provider, just let them know they will need to bill you directly. They will also remove your lender as the beneficiary on the policy. 

For your property taxes, notify your clerk’s office that they will need to bill you directly. And if you paid a homeowners association (HOA) fees through your mortgage payment, those fees are now yours to pay, too – just reach out to your property manager or HOA. 

By law, any remaining funds in your escrow account must be refunded to you by your loan servicer or lender within 20 days of closing the account.

Preparing for Extra Monthly Cash 

It’s great to enjoy the new cash infusion from paying off your mortgage but be mindful of how you spend it. You’ve worked hard to maintain your home as an investment, so it’s smart to keep that attitude with your new funds. We’ve got some suggestions: 

Pay off debt: Paying off high rate credit cards and other loans can save you interest and grow your credit scores. 

Start (or grow) an emergency fund: Keep some cash ready for unexpected expenses. A good rule of thumb is three to six months of living expenses. 

Grow your retirement accounts: Add money to your existing investments or create new ones.  

Consider your financial goals: Whether you want to travel, buy an investment property, or go back to school, now you have the money to reach your goals, without going into debt. 

Check Your Credit 

Once you’ve paid off your loan, it’s smart to check your credit reports to be sure they reflect the payoff and show a zero balance. Be aware that when you pay off your mortgage, your scores may briefly decline.

Frequently Asked Questions

Chances are, if you're wondering about it, someone else has too. Here are answers to some of the questions we hear most often.

What documents will I receive when I pay off my mortgage?
After making your final mortgage payment, your lender or loan servicer will send you a set of documents to officially release you from the loan. These typically include a canceled promissory note, a loan payoff letter showing a zero balance, a deed of reconveyance releasing the lien on your home, a refund of any remaining escrow funds, your property deed, and a certificate of satisfaction from the local clerk's office. It’s a good idea to follow up with your local clerk's office to confirm they’ve received the necessary documentation from your lender.
What happens to my escrow account when I pay off my mortgage?
When you pay off your mortgage, your escrow account is closed. By law, your lender or loan servicer is required to refund any remaining funds in the escrow account to you within 20 days of closing the account. After that, you will be responsible for paying your property taxes and homeowners insurance directly.
Do I still have to pay property taxes after paying off my mortgage?
Yes. Paying off your mortgage doesn’t eliminate your property tax obligation. While your mortgage payment likely included property taxes paid through an escrow account, once the loan is paid off, you’ll need to pay property taxes directly to your local government. Contact your local clerk's office to let them know they should begin billing you directly.
What happens to my homeowners insurance when I pay off my mortgage?
Your homeowners insurance policy remains in effect after you pay off your mortgage, but the billing arrangement will change. Previously, your lender was listed as the beneficiary and premiums were paid through your escrow account. Once the mortgage is paid off, you’ll need to notify your insurance provider to bill you directly and to remove the lender as a beneficiary on the policy.
Will paying off my mortgage hurt my credit score?
Paying off your mortgage may cause a temporary, modest dip in your credit score. This can happen because closing an active installment account affects your credit mix and the average age of your accounts. The effect is usually short-lived. After paying off the loan, check your credit reports to confirm that the account shows a zero balance and is correctly marked as paid in full.
What should I do with the extra money after paying off my mortgage?
Once your mortgage is paid off, you’ll have an additional monthly cash flow. Common uses include paying off higher-interest debt such as credit cards, building or growing an emergency fund covering three to six months of living expenses, contributing more to retirement accounts, or working toward other financial goals such as travel, an investment property, or education.
What is a deed of reconveyance?
A deed of reconveyance is a legal document your lender provides after your mortgage is fully paid off. It officially releases the lien the lender held on your property and confirms the lender no longer has a legal interest in your home. This document should be recorded with your local government to update the public record showing you own the property free and clear.
How long does it take to receive my payoff documents?
The timeline for receiving payoff documents varies depending on lender and state, but most lenders send mortgage release documents within 30 to 60 days of receiving the final payment. Your escrow refund is required by law to be returned within 20 days of account closure. If you have not received your documents within a reasonable timeframe, contact your lender or loan servicer directly.

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The views and statements expressed are deemed reliable as of the publish date indicated and may not be accurate or reliable at any future date. The views and statements provided are those of the author. Discussions regarding any financial information provided are not intended as individual recommendations and do not reflect the views or advice of Atlantic Bay Mortgage Group, L.L.C. The views expressed are subject to change at any time in response to changing circumstances in the market. *For refinances, the total finance charges may be higher over the life of the loan. Atlantic Bay Mortgage Group, L.L.C. disclaims any obligation to publicly update or revise any views expressed or information given. Loan programs may change at any time with or without notice. Information deemed reliable but not guaranteed. All loans subject to income verification, credit approval and property appraisal. Not a commitment to lend. Atlantic Bay Mortgage Group, L.L.C. NMLS #72043 (nmlsconsumeraccess.org) is an Equal Housing Lender. Located at 600 Lynnhaven Parkway Suite 100 Virginia Beach, VA 23452.