What Happens After You Pay Off Your Mortgage

Beyond the biggest and most obvious benefit — fully owning your own home — paying off your mortgage opens the door to several benefits and opportunities, including:

• No more monthly mortgage payments: That means you could save thousands of dollars each month — dollars that you could put toward retirement, home improvements, paying down other debts, building your emergency savings or growing your wealth through investments. Eliminating your monthly mortgage payment not only provides immediate relief, it also has the potential to set you up for long-term financial success and stability.
• No more interest payments: Speaking of saving thousands of dollars, the average interest rate for a 30-year fixed-rate mortgage is 6.19%.* Depending on the purchase price of your home and how much money you put down at the time of purchase, paying off your mortgage — especially paying it off early — could eliminate tens of thousands of dollars in interest payments over the lifetime of your loan. That’s even more money back in your pocket to use as you see fit.
• Lower baseline living costs: Without monthly mortgage payments to worry about, your baseline living expenses will go down dramatically, leaving more room in your budget. With more disposable income at your fingertips, you can afford to make smart investments while still having money left over for the things you love, such as hobbies and family vacations.
• Security for future generations: For homeowners with children or grandchildren, one of the biggest benefits to paying off your mortgage is fully owning a valuable asset you can pass on to future generations. Homeownership is still one of the most powerful ways to build generational wealth and creates security for your loved ones, even long after you’re gone.
• Peace of mind: In addition to the increased cash flow, paying off your mortgage provides more stability and security in the face of economic downturns. Keeping up with monthly mortgage payments is a real concern for homeowners during financial crises; owning your home outright means you have one less line item on your list of outgoing expenses. A fully paid off home is also a valuable asset you can sell should you ever need to.At the end of the day, nothing compares to the peace of mind that comes with knowing that you and your loved ones have a safe, stable place to call home.

* At time of publication in December 2025.

Paying off your mortgage isn’t quite as simple as just making your final payment. There are a few additional steps you’ll need to take. These are:

1. Contact your local county records office. After you’ve made your final payment, your lender or loan servicer should notify your local records office and send it a mortgage satisfaction letter (also known as a lien release), thereby releasing you from the debt. This process can take a few days or even weeks to complete. You’ll want to contact your records office after the fact to ensure it’s received the appropriate paperwork and to follow up with your lender or loan servicer if necessary.
2. Gather documents from your servicer. In addition to the mortgage satisfaction letter, you should receive a deed of conveyance from your lender, which is a legal document that transfers ownership of the property to you, and a canceled promissory note or final loan statement with a zero balance. Keep all of these documents in a safe, consolidated location, as you’ll need them should you decide to sell your property in the future.
3. Cancel autopay. If you set up automatic withdrawals for your monthly mortgage payment, be sure to turn them off so you aren’t hit with any surprise charges. You may need to call your bank to do so.
4. Receive your escrow refund. An escrow account is a bank account set up by a lender after a borrower closes on their mortgage. The lender sets aside a percentage of the borrower’s monthly mortgage payment to fund that account, and then uses those funds to pay property taxes and homeowners insurance. After the mortgage is paid off, the lender closes the account and refunds the borrower any remaining funds, typically within 20 to 30 days of closure.If you do not receive an escrow refund but suspect that there were remaining funds within your escrow account, follow up with your lender directly to confirm.
5. Set up your own escrow account. Paying off your mortgage eliminates your monthly mortgage payment, but you’ll still need to pay property taxes. While specific requirements vary by city and state, most areas require you to pay property taxes once or twice a year. To avoid any late or missed payments, it’s best to open an escrow account — in other words, a dedicated savings account — in your own name and set up automatic withdrawals.You might experience some sticker shock the first time you pay for property taxes because you’ll be paying in full, compared to when your lender collected smaller sums each month to fund your escrow account.

1. Update your homeowners insurance policy. While you aren’t legally required to have homeowners insurance after your mortgage is paid off, having coverage can protect you against fire, theft, vandalism and damage caused by natural disasters. Should you choose to renew your policy, be sure to remove the mortgagee clause and to set aside enough money to cover your monthly premium.
2. Update your will or estate plan. It’s important to meet with your attorney after your mortgage is paid off to update your will to reflect your new debt-free status and make designations for the property in the event of your passing.
3. Reassess your financial goals. With your mortgage paid off, it’s the perfect time to revisit your budget and set new financial goals. Keep reading for some tips on where to channel your focus.

One of the major concerns for borrowers considering paying off their mortgage (either early or on time) is the effect it will have on their credit score. While it’s true that your credit score will go down when your mortgage is paid off, the impact is relatively minor — usually only 10–20 points — and temporary. So long as you keep your other accounts in good standing, your credit should recover after several months.

Paying off your mortgage is the first step to securing your financial future. To make the most of the money you previously reserved for monthly mortgage payments, consider:

• Creating an emergency fund: An emergency fund can help you budget for unplanned expenses, such as home repairs, medical bills or a job loss. If you already have an emergency fund, consider increasing your allocations to it. The general recommendation is that your fund be able to cover three to six months’ worth of expenses, though six to 12 months is ideal.
• Paying off other debts: If you have any other outstanding debts, now’s the perfect time to start paying them down.
• Renovating your space: Whether it’s renovating your kitchen, finishing your basement or hiring a maintenance professional, there’s no shortage of improvements you can make to your space to make it more comfortable and enjoyable — and, depending on the changes you make, more profitable should you choose to sell or rent it out in the future.
• Maxing out your retirement accounts: With extra monthly cash flow, increasing contributions to your 401(k), traditional IRA or Roth IRA can significantly strengthen your financial future. If you’re not already contributing to the annual limit, consider doing so to decrease your taxable income, grow your savings faster and build a stronger safety net.
• Investing in a diversified portfolio: If you’re already contributing to retirement accounts, think about building or expanding an investment portfolio separate from them. A diversified mix of assets such as index funds, stocks, bonds and real estate investment trusts can help you grow your money over time and meet your long-term financial goals. The sooner you invest, the more you can benefit from compound growth.
• Purchasing a second property: Ever dreamed of a beach house in the Florida Keys, or maybe a ski house by Smuggler’s Notch? Not only is a vacation home a great place to spend time with family and friends, it can also be a source of additional income if you rent it out during the off season. Alternatively, you could choose to purchase a property strictly as an investment, using it as a full-time rental to grow your network and potentially benefit from long-term appreciation.

Have any questions about how to prepare for this exciting new stage of your life? Blue Water Mortgage is here to help — contact us for assistance.

How long does it take to pay off a mortgage?

Most mortgages are designed to be paid off over 15 or 30 years, but the exact timeline depends on your loan term, interest rate, monthly payment amount and whether you make extra payments. Some borrowers speed up the process by making one extra payment each year or refinancing to a shorter term, while others pay for the lifetime of the loan. Both are perfectly acceptable paths to homeownership.

If I pay off my mortgage, will I get escrow money back?

You might! If you’ve been paying property taxes and homeowners insurance through a lender-managed escrow account, any leftover balance should be refunded to you after your mortgage is paid off.

Does paying off your mortgage affect your credit score?

It does, but usually not by much. Paying off your mortgage closes a long-term credit account, which can cause a drop in your credit score (typically 10–20 points). This is temporary, though; so long as your other accounts are in good standing, your credit should recover in several months.

Do I still need homeowners insurance after I’ve paid off my mortgage?

Yes and no. While it isn’t legally required, homeowners insurance can protect you against fires, theft, vandalism and other unwelcome surprises. It’s an added expense but one that’s well worth it given that your home is one of your most valuable assets.

What paperwork do I need to file after paying off my mortgage?

Once you’ve made your final payment, your lender should send a mortgage satisfaction (also known as a lien release) to your local county records’ office showing that the debt has been paid. Since your lender will likely do the filing for you, it’s smart to follow up and confirm that the records office received the letter in question.

Is paying my mortgage off early a good idea?

It can be! Paying off your mortgage early saves you interest and gives you more financial flexibility — just be sure you aren’t sacrificing other priorities, such as your retirement savings, emergency funds or paying down higher-interest debt to do so.