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Mike Ballew is the founder of Eggstack®. He’s a member of the Financial Planning Association, an engineer, and software developer.
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Mike Ballew – Financial Planning Association member, engineer, author, and founder at Eggstack.
Eggstack is an independent financial technology company located in Jacksonville, Florida. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
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Much controversy surrounds the subject of paying off your mortgage – whether you should do it early or not. Rather than debate that issue, let's focus on what happens after your mortgage is paid off.
You have made monthly mortgage payments for most of your life and now you've finally paid off your mortgage. Congratulations! It's a remarkable feat. It's very freeing to know that you own your home free and clear. Paying off your mortgage is a major milestone on your journey to Financial Freedom.
Your mortgage provider is obligated to issue a mortgage lien release, also known as a Satisfaction of Mortgage. The lender sends the document to your county records office where it is officially recorded. You can go online to your county recorder of deeds' website to follow up and make sure it happened. Allow 90 days for the process to take place.
A portion of the mortgage payment you made each month went toward paying your homeowners insurance and property taxes. The bank sets that money aside in an escrow account. Being the conservative types that they are, there's no doubt money left over in the account. That is your money and you are entitled to it. Allow 30 days for the bank to mail you a check, and if it doesn't happen give them a call.
You would think that since the county recorded your mortgage lien release they would know to start sending the tax bills to you, but government doesn't always work that way. Contact your county office and arrange for the tax bills to start coming to you.
On that same call, you can inquire about the amount and timing of the property tax payments. You are responsible for making those payments, and just like with the mortgage, if you don't make them you could lose your home.
Contact your homeowners insurance and let them know that you've paid off your mortgage and you want the bills to start coming to you. Again, you need to find out the amount and when the bills are due.
Ask your homeowners insurance to remove any references to the mortgage lender on your account. If it has been a few years since you shopped around for insurance, now might be a good time to see if you can find a better deal.
You need to establish your own individual "escrow account". It's not an actual escrow account in the true sense of the term, but it functions in the same manner. Create a new account where you bank to serve as your individual escrow account. Add the annual cost of homeowners insurance to the annual cost of property taxes and divide by 12. That's how much you need to put in the account every month to pay the taxes and insurance.
You can set it up to automatically transfer the funds each month from your checking account into your individual escrow account. Expect to add a chunk of cash for the first bills because chances are you will not have saved a full year when they come due. Every year thereafter, you will have the money to pay the taxes and insurance when they come due.
By making mortgage payments all those years, you've already done the heavy lifting. Now you can live in mortgage-free bliss and your monthly obligations will be far less.
Paying off your mortgage is a big deal. Ideally you want to do it before you retire. Break out the champagne and celebrate, you deserve it!
Photo credit: Pixabay Eggstack News will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
Financial Planning Association member, engineer, author, and founder at Eggstack.
