Congratulations – after many months of meticulous budgeting and self-discipline – you made the final payment on your mortgage.
Next, your mortgage lender will send you a set of documents. This includes:
- Closing statement letter: This letter confirms you settled your mortgage balance in full.
- Copy of your title deeds: The copy is yours to keep and confirms that you are now the legal owner of the property.
- A discharge: The discharge removes your mortgage lender’s charge over your home. Removing this charge is quite simple and can be done by the mortgage lender.
You can also instruct a solicitor to handle the process on your behalf. The solicitor completes your security discharge application and sends it to the lender to sign. Once the discharge application is signed, the signed application form and application fee are delivered to the Land Registry for the standard security to be discharged.
Once the Land Registry has processed the application, the deeds title register is updated, and the standard security is removed.
If you have not received any documents from the lender after clearing your mortgage account, contact their office. You can ask them for your closing statement letter, a copy of your title deeds, and the discharge application form to finalise the process.
Topics
Other Tasks To Complete After Making Your Final Mortgage Payment
These are some additional admin tasks you need to take care of after paying your last instalment:
Contact your insurance broker
Contact your insurance company and inform them that you paid off your mortgage in full.
Because the house now belongs to you, you are responsible for paying your home insurance directly to them. Inform your broker that they should remove the mortgage lender from the insurance policy.
Arrange for homeowner’s insurance (and include this in your monthly budget) to protect the house structure and its contents.
Cancel your automatic bank payments
Check with your bank and cancel any direct debit payments to ensure you don’t unknowingly continue making monthly mortgage payments to your mortgage lender.
Contact the tax collector
Inform the HMRC offices that you are now the legal owner of the property and that they send all tax statements directly to you.
What Are The Benefits Of Paying Off A Mortgage?
Paying off your last mortgage instalment and clearing your home loan debt has a range of benefits:
- You now own your house: The most important benefit of clearing your mortgage debt is you own the property outright.
- Financial stability: After years of budgeting and making your monthly payments, you can now take a sigh of relief and relax. Paying off your mortgage or interest-only mortgage brings a lot of peace of mind and also ensures that there is now a substantial amount of money left in your bank account to use for other financial obligations.
- Financial flexibility: The extra money now available in your bank account can be paid into a savings account and put to good use. Consider opening a tax-free individual savings account (ISA) or investment account to save that extra cash for a rainy day.You can also consider taking out a lifetime mortgage on your home. Available to UK residents older than 55, a lifetime mortgage is a form of equity release that frees up money which you can use to renovate your home, take an overseas holiday or spend on a big-ticket expense.
- Less stress and worry: Budgeting for and making monthly mortgage payments over several years can be stressful. Now that you have reduced your debts significantly – by clearing your mortgage agreement – you can sit back and enjoy your newfound financial security.
Should I Pay Off My Mortgage Early?
If you can, you should pay off your mortgage early.
Mortgage lenders agree that if you have substantial debts – such as a mortgage, credit card bills and car instalments – you should clear those liabilities as soon as possible.
Before doing so, take these factors into consideration before you finish your mortgage term early:
Advantages:
- You will be the rightful owner of your house
- Reduces your debt burden
- Reduces your interest charges, leading to thousands of pounds in savings
Disadvantages:
- You are liable for early repayment charges (a redemption fee) and exit fees
- You miss out on interest and tax benefits by clearing your mortgage with your savings
- Not clearing higher-interest debts such as credit cards and car instalments
FAQs
How does paying off my mortgage affect my credit score?
Paying off your mortgage does not have a significant impact on your credit score. After your last mortgage payment, your credit report will automatically update but won’t change by much. If you made a large payment as your final mortgage instalment, your credit score may fall by a few points.
What’s the average age people pay off their mortgages in the UK?
A recent study shows that UK home buyers, on average, only manage to clear their mortgages at 65 years of age. Due to the exorbitant house prices, modern-day first-time buyers tend to extend their mortgage terms to make buying a home more affordable and attainable. In comparison, in the 1990s, the average age to pay off a mortgage was 53.
Sources:
https://www.gov.uk/government/organisations/hm-revenue-customs