What Happens When a Mortgage Is Paid Off?


You’ve finally paid the last payment on your mortgage, and even though there were times when it seemed like it would never happen, the day you’ve been waiting for has finally arrived. You will soon own your house free and clear of any debt, and you will also have a significant increase in the amount of disposable income you have available each month. However, in order to finalise this transaction and make it legally binding, you and your lender will need to execute a few significant acts together. You shouldn’t kick back, relax, and give out a sigh of relief until you’ve finished doing all of the required measures to formally wipe off the debt from your mortgage.


Your lender will give you your trust deed and cancelled promissory note after they have finished processing your last payment and have cancelled the note. You, too, will have some work to do, and one of your tasks will be to remove your lender as an additional insured on your homeowner’s policy.

Get it in Writing

The mortgage promissory note that you signed when you took out the loan should be cancelled and returned to you by the lender after you have paid off the whole balance of your mortgage loan. This demonstrates that you have complied with the conditions of the loan, and as a result, the lender is no longer owed any money by you. You could also get the trust deed that was cancelled that was used to secure your loan with the title to your property and that gives the home to the lender in the event that the borrower does not repay the loan. There isn’t a standard operating system that all mortgage firms adhere to, and some of them could not even provide you any documents at all. If the one you use does not, you should feel free to ask them for copies of the documentation that you have completed so that you may preserve it for your records.

Remove the Lender’s Lien

It is the responsibility of the lender to inform the county or municipal recorder that the mortgage lien that was placed on your property has been removed. This is accomplished with the use of a Release of Deed of Trust or a Satisfaction of Mortgage, documents that legally free your property from any claims that may be made by the lender. If the lender does not offer to supply you with a certified copy of this document, it is in your best interest to submit a request to the office of the recorder for one. You are responsible for having the release recorded on your own if the lender does not do so, and you may do so by taking the cancelled note and the trust deed to the office of the recorder.

Call Your Insurance Company

After your loan has been paid off, you will be responsible for taking a few actions on your own. Make contact with the insurance company that insures your house to get the name of the lender removed from the policy. Because the lender is no longer entitled to any claim on the property, it should not have the legal right to receive any insurance reimbursement in the event that there is a fire or another kind of damage. It is possible for the process of filing and collecting on an insurance claim to become more difficult if you do not get the lender’s name removed from the policy. If you previously had an escrow account, you will now be responsible for handling the payments for your insurance and property taxes on your own.

Give Yourself Credit

Make sure that your credit report reflects that the mortgage has been paid off. It is possible that your mortgage provider will not necessarily carry out this necessary procedure on its own. There are a lot of mortgage firms and other creditors who will notify the credit reporting agencies as soon as you miss a payment, but they aren’t necessarily as excited about reporting the positives as they are about reporting the negatives. Keep an eye on your credit report and check to see if this significant achievement in your financial life is reflected there. If it hasn’t shown up after a month or two, contact the company that is providing your mortgage and urge them to make sure it does.

When Refinancing Makes More Sense

If you are given the choice between paying off the debt or refinancing, you should think about doing the latter. Even though you have a number of options available to you for arranging an early payback of your mortgage, not all financial advisors agree that this is the most prudent course of action for you to take. It is recommended, according to this point of view, that if you have a significant amount of high-interest debt, you try to refinance your home loan at a reduced interest rate, if that is feasible, and use the savings to pay off high-interest credit card bills and other types of instalment loans. When you pay off your mortgage in full, you no longer qualify for the tax benefit that applies to mortgage interest, which makes it even more affordable to take out a loan to purchase a property.