Paying off your mortgage is a liberating and exciting experience, especially if you have been planning and waiting to do this for a very long time. The real question is, however: Is it the right time to pay off your house?
While most gut reactions would scream, “Yes!” there is a catch. Take a look at these tips that will help you determine if now is the right time to pay off your home.
How much do you owe?
Depending on the dollar amount you owe and how much savings you have, the most logical step you would need to determine is whether or not getting rid of this debt would put you in the hole for savings - leaving you vulnerable financially if an emergency occurs. Paying off your home is great, but only if you are in a great financial condition to do so.
Do you have other debts?
Paying off your home should be the very last debt you pay off. Do you still have a car loan, large outstanding credits, or even student loans? As a rule of thumb, all outstanding debts should be paid off before you ultimately pay off your home. The good news? Once you do pay off your home, you will truly be debt free.
Is refinance an option?
Take into consideration what your future goals are and whether or not a mortgage payment will make or break your goals. For example, do you need to do some work on your house that make require an additional loan? Would a cash-out refinance be a better option? Or are you looking to both create an income property with your current home and travel the world. Updates may need to be done in order to make a profit on your home. Having smaller payments in order to help your home live to its full potential may be the best solution as opposed to paying off the mortgage.
I want to pay off my mortgage...now what?
Congratulations! You are officially debt free, but the next steps and what to expect are crucial in order to ensure all of your documents are correct. Keep an eye out for your loan company to send the original note and deed to your home back to you - some may not do this, but you can always request it. After a few months, pull your credit report as well to ensure that no outstanding debt is on file. Finally, update your taxes and insurance. When you have a mortgage, your insurance is linked to the mortgagee, make sure once you pay off your mortgage, you contact the mortgagee to ensure it is no longer associated with your home. For tax purposes, you are still responsible for paying your annual property taxes, which is usually sent to your lender. Make sure you now receive that to avoid any penalties.