I paid off my mortgage, now what

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If you paid off mortgage, pat yourself on the back! It is a great financial achievement. Whether or not you paid off your mortgage early, once that mortgage is no longer hanging over your head, it’s time to figure out what to do next. There are a few house-keeping actions you need to do once your mortgage is paid off, and then it’s time to think about what you can do with the extra money you have.

Checklist: What To Do Once Your Mortgage is Paid Off

We like to talk about “owning a home,” but the reality is that you don’t actually own it until your mortgage is paid off. As long as you have that mortgage, the bank really owns the home. If you miss a payment, the bank can repossess the home, since it’s the bank that put the money up for it in the first place. Because this circumstance changes when you pay off your mortgage, there are a few things you need to do:

  • Revise the title: You will need to have your title revised to reflect that the home is no longer mortgaged. You should also look into the legalities involved in “tenants by the entirety” and “tenant in common” on your title. Consult an attorney knowledgeable in real estate matters to make sure that your title accurately reflects your situation and your desires, especially if you have a spouse.
  • Make property tax arrangements: In many cases, your property taxes are paid as part of an escrow agreement when you arrange your mortgage. A monthly amount is added to your mortgage payment each month, to be applied to your property tax bill. Once your mortgage is paid off, you will need to pay this bill on your own. Go to the county assessor’s office, your city or county tax office to find out the procedure. You will need to know whether you pay one lump sum each year, or pay semi-annually. You can set aside money each month for property taxes in order to avoid having to come up with the money all at once.
  • Review your estate plan and will: This milestone is a good time to review your estate plan and your will. Decide what you want to have happen to your home if you become incapacitated or die. A good estate attorney can help you work out how your property will be distributed.

What to Do With That Extra Money

Once you get the paperwork out of the way, it’s time to decide what to do with the extra money that you have each month. Create a plan for that money. Consider your financial goals, from retirement to helping others, and decide what you want to accomplish with that money. Some things you might consider using the extra money for include:

  • Invest for income: You can work out an asset allocation that is appropriate for your age and situation in order to help provide income for later. Converting your monthly mortgage payment into income investments that provide an immediate income stream is another possibility.
  • Start a business: If you’ve been looking for a business opportunity, you can take the extra money you have each month and start a business. It might be enough to get a side business established, set up a good web site for residual income, or even to quit your day job and devote yourself to getting a business off the ground. It all depends on how much you are saving now that you no longer have a mortgage.
  • Invest in your heirs: You probably have kids or grand-kids. Your estate plan or will will take care of your legacy, but you might want to do something for them now. You can set up funds for your children or grandchildren with that money. Many decide they want to help their children or grandchildren with college, and set up 529 plans. This can be a good way to give a gift that keeps on giving.
  • Provide for charity: Paying off your mortgage can free up money that allows you to leave a charitable legacy. You can set up a gift fund or trust for a cause that you believe in, helping others for years to come.
  • Invest in yourself: It is said that investing in yourself can often be the best investment. If you have a relatively long work career ahead of you, you may want to upgrade your skills or go for that college program that you always wanted. On the other hand, you may want to learn new skills or hobbies that pay you back in more personal and socially satisfying ways.
  • See the world: Many find that the extra money can be used to travel. You can visit new places and see new things, with your home as your base camp. There are a number of interesting volunteer travel opportunities that allow you to help others while seeing the world.

Prioritize your financial wish list, and think about your future prosperity. You can even divide up the extra money each month so that some of it is invested for income, and some of it goes toward education or travel. Figure out what you want to do, and then make a plan so that paying off your mortgage works to your financial advantage.



Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.