What happens when my mortgage is paid off?

If you’ve nearly reached the huge milestone of paying off your mortgage, congratulations! 

After decades of paying your mortgage, this is a huge achievement and will offer you more financial freedom, although you may wonder what happens next. 

We reveal how to make your final mortgage payment, what else you need to do, and what to consider next. 

How do I make my final mortgage payment? 

If you’re ready to clear your mortgage, you must request a final redemption amount from your mortgage lender, either online, over the phone, or through their app.  

This will tell you the outstanding amount, including capital and interest, and the end date of your mortgage by which you must pay it. 

If you have an interest-only mortgage, you’ll need to pay back the loan as you were only paying off the interest throughout the mortgage term.  

It’s also worth checking if there are any fees, such as early repayment charges (ERCs) and exit fees, and how much these will be. ERCs may apply as a mortgage provider can miss out on interest if the mortgage is paid off early, while exit fees cover releasing the deeds and closing your account.   

What can I expect after making my final mortgage payment? 

You may need to fill out some paperwork, and there are a few documents you’ll receive once you’ve cleared your mortgage. 

The first is a closing statement that confirms you’ve officially paid your mortgage and no longer have anything outstanding with your mortgage provider.  

You may also get a copy of your title deeds confirming you own your home, which is registered with the Land Registry. 

The mortgage lender should remove its charge on your home, which offered it vital rights, such as the ability to sell your home if you default and send you a discharge note confirming this.  

If the mortgage lender doesn’t remove the charge, a solicitor can do this for you, as well as update the Land Registry and get a copy of the title deeds if not provided. It’s worth finding out how much it’ll cost to use a solicitor before proceeding.  

What else do I need to do after paying off my mortgage? 

While it’s tempting to get confirmation of the mortgage being cleared and leave it at that, there are a few other things to look into. 

• Life insurance: If you have a policy linked to your mortgage, has this been cancelled? It might be worth talking to an insurance broker to ensure insurance policies reflect your new circumstances.  

• Direct debit: You should also check that your direct debit for your mortgage payments has been cancelled. 

• Contact insurance providers: You should contact any insurance providers, whether you have buildings or contents insurance, to let them know you’ve paid off your mortgage and to remove the lender. 

• Buildings insurance: This is mandatory when you have a mortgage, but no longer once you’ve paid it off. However, if anything happens to your home, it can be hugely expensive for repairs, so carefully consider if you want to cancel your policy. If you have a contents insurance policy, checking the cover is also worthwhile.  

• Safely store your documents: It’s a good idea to keep any mortgage documents, including the final statement and confirmation it’s paid off, and the title deeds somewhere safe.  

• Do you need to review your finances? Paying off your mortgage means you’ll now have more disposable income, and it may change aspects of your inheritance planning. So, it’s worth checking your insurance policies and will are up to date for peace of mind.  

Will my credit score be affected? 

It is unlikely that your credit score will be significantly affected by clearing your mortgage. 

This is because your mortgage and previous payments have already been factored into your credit score. Your score will only change if you clear a significant amount of your mortgage.  

It’s worth making a note to check your credit report and score a few months after clearing your mortgage to make sure the final payment is reflected in both. 

What are the pros and cons of paying off my mortgage? 

There are many advantages and disadvantages to consider when paying off your mortgage. 

The pros of paying off your mortgage 

• More disposable income: According to Nationwide, first-time buyers spend 37% of their take-home pay on mortgage payments, representing a huge chunk of income. Without a mortgage, you can use this money as you choose. 

• If paid early, you can save on interest: You can potentially save thousands by repaying your mortgage early, whether it’s through regular overpayments or a lump sum.  

• You own your property: Owning your home means you can access equity in it if you want, and your mortgage lender’s conditions no longer restrict you. 

• Peace of mind: You won’t have to be concerned about losing your home if you struggle to make payments or about the potential impact of interest rates on your payments. 

The cons of paying off your mortgage 

• Early repayment fees: If you’re paying off your mortgage earlier than anticipated or by a significant amount, you may have to pay an early repayment fee, which can be hefty. 

• Your money could be working harder: If you’re using money that could be used elsewhere, such as in investments, you could be losing out on potentially better returns. 

• Your money is harder to access: As your money is tied up in your home, it can be harder to access it if it’s urgently needed.  

What should I consider now that my mortgage is paid off? 

Now that your mortgage is paid off, it’s a good idea to evaluate your long-term goals.  

So, it’s worth asking: 

• Are there any other debts I need to pay off? 

• Do I have an emergency savings pot with three to six months’ expenses? 

• Is it worth contributing more to my pension? Will my employer boost my contribution? 

• Should I invest my money? If so, where? 

• Should I invest in my hobbies? 

• Do I need to invest in my home or other goals, such as my child’s education? 

It’s worth considering expert financial advice when deciding where to invest your money. 

For example, a financial adviser can help you determine your risk appetite and the right portfolio if you’re considering investing.  

Can I remortgage once I’ve paid off my mortgage? 

You can remortgage once you’ve cleared your mortgage. However, you will have to face affordability checks and meet certain criteria, and there could be term limits you should be aware of. 

It’s worth considering that you may not be able to borrow over as long a time period as before if you’re close to retirement or already retired, plus you’ll need to pay legal and remortgage fees.  

However, as you fully own your property, you may be able to find competitive deals. 

Get expert financial advice 

Paying off your mortgage is an exciting achievement, offering you the chance to invest your money in other areas, whether it’s investments, travelling, retirement, or hobbies. 

It can be challenging to determine how to reach your future goals, which is why financial advice can be useful. 

Unbiased can quickly match you with a qualified financial adviser.