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Paying off mortgage - things to consider

5,920 Views | 33 Replies | Last: 2 yr ago by combat wombat™
AggieMainland
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4:17p, 6/25/21
Going to pay off my mortgage early in a couple month and want to make sure I understand all of the impacts by doing that. (Don't really want to get into the discussion of if I should pay off the mortgage early or not. That decision has been made already.)

Currently:
-Monthly mortgage payment includes Principal, Interest, and Escrow for Property Tax and Home Insurance.

After pay off:
-Obviously no more Principal or Interest monthly payments
-Property Tax due once a year now vs monthly escrow payments
-Home Insurance same as Property Taxes (although there is probably a way to pay that off over the year for a small fee similar to car insurance).

Does anything else change? Seems like no and its that simple. But I've always had a mortgage payment so this is new territory.

Thanks!
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SteveBott
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4:48p, 6/25/21
AG
That looks right. Yes you can pay insurance monthly or quarterly.
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schwack schwack
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6:32p, 6/25/21
AG
Congratulations - it's a great feeling!
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Howdy Dammit
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7:25p, 6/25/21
AG
Congrats!
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AggieMainland
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In reply to SteveBott • 9:14p, 6/25/21
Perfect. Thanks!
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jja79
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9:24p, 6/25/21
AG
When you receive your release of lien be sure to file it in your county. When you eventually sell you don't want to be chasing that.
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Redstone
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In reply to AggieMainland • 9:38p, 6/25/21
AG
Should you pay it off early? It may be useful to have a discussion of the pros and cons - especially if you have investment opportunities (opportunity costs).
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John Francis Donaghy
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9:50p, 6/25/21
With some companies you might get charged a slightly higher rate for paying insurance monthly, maybe by way of losing a discount you got for paying lump sum.

Just open a new account at your bank, and set up a monthly autopay for a month's share of your property taxes and insurance premium. Let the autopay's go, don't touch the money, and when your property taxes and insurance come due, the cash will be there, just pay it like any other bill.
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Mas89
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In reply to jja79 • 10:00p, 6/25/21
AG
jja79 said:
When you receive your release of lien be sure to file it in your county. When you eventually sell you don't want to be chasing that.
And keep a copy in your lock box. But just make sure it's recorded by the county as stated.
Paying one annual insurance payment is convenient and the annual tax bill in December.
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combat wombat™
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11:21p, 6/25/21
AG
Without the interest that you're paying to the bank you may no longer be able to itemize your deductions. However, that's not necessarily a bad thing. I never recommend that someone spend $1 to save 30 cents.
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itsyourboypookie
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4:49a, 6/26/21
The lien protects you from subordinate liens. As long as it's your homestead they are pretty difficult to attach, but it doesn't mean a future contractor won't try.

I'd structure the payoff differently to keep vulture litigious contractors from taking a run at my home.
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jja79
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In reply to itsyourboypookie • 7:18a, 6/26/21
AG
Do you mind explaining that?
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ratfacemcdougal
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In reply to John Francis Donaghy • 7:18a, 6/26/21
John Francis Donaghy said:
With some companies you might get charged a slightly higher rate for paying insurance monthly, maybe by way of losing a discount you got for paying lump sum.

Just open a new account at your bank, and set up a monthly autopay for a month's share of your property taxes and insurance premium. Let the autopay's go, don't touch the money, and when your property taxes and insurance come due, the cash will be there, just pay it like any other bill.
Came here to say this.
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Texker
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5:21p, 6/27/21
AG
When we paid off our mortgage on the first house we paid the homeowner's premium monthly via auto-debit along with our auto insurance. It wasn't required to do that but it was convenient.

For property taxes, we opened an account as suggested above.
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Troglodyte
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9:35p, 6/28/21
AG
You may want to consider a home title lock. You can also do this free through the county.
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davido
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9:36p, 6/28/21
AG
Paid off sub-4% money?

Congrats, I guess.
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Hurricane Laura
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In reply to combat wombat™ • 11:42p, 6/28/21
combat wombat said:
Without the interest that you're paying to the bank you may no longer be able to itemize your deductions. However, that's not necessarily a bad thing. I never recommend that someone spend $1 to save 30 cents.

One way to address this is to double up property taxes. Pay in January and December of the same year since they are due January 31. If it gets you over the standard deduction every other year, it's a winning strategy. Can also be useful with a mortgage.
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combat wombat™
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In reply to Hurricane Laura • 12:19a, 6/29/21
AG
I don't disagree with you. However, state and local taxes are limited to $10k. This strategy no longer works for many people, especially with the higher standard deduction amounts.
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schwack schwack
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In reply to jja79 • 9:55a, 6/29/21
AG
Quote:
When you receive your release of lien be sure to file it in your county. When you eventually sell you don't want to be chasing that.

So true! Long story, but, when my Mom sold her house we found out they had never done that from a bridge loan they took out when they bought it (before their old house sold). We found hand written notes from Dad of his record of paying it off in 4 months. I'm sure they had no idea they needed to file anything with the county & Dad had always handled everything & we couldn't find the old paperwork. Their old bank had been sold to another bank years ago & they couldn't find the payoff information either. It all worked out - thanks to small town help - because everyone agreed it had been paid off. Their old loan officer is at yet another bank & he remembered it because he knew my parents. The current bank was very accommodating & helpful, released the lien & it sold, but it was a stressful thing for her & a hassle for everybody!
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halfastros81
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In reply to John Francis Donaghy • 12:07p, 6/29/21
AG
We do the same. The money is sitting there when it's time to pay. Easy. Very Dave Ramsey-ish approach.
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The Silverback
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7:09a, 6/30/21
AG
A couple of counterpoints:

You obviously no longer able to write off interest

Not sure what your payoff is, but with money being so cheap could you use that money elsewhere to earn you more than your current interest expense?

If you are retired and longer have income coming in, remember when you pay off that mortgage it is unlikely you will ever qualify for one again. So when you have all that money tied up in your house the money becomes useless should you need it for investments, life, etc. until you sell the house. Not sure there are any cash out programs out there that don't require income verification.

None of that might apply to you but just a couple of thoughts.
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jja79
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In reply to The Silverback • 8:07a, 6/30/21
AG
After 59 1/2 you can create a qualifying income through asset dissipation. Can be used for either a purchase, rate and term refinance, cash out refinance or a HELOC.
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Gilligan
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8:54p, 6/30/21
AG
First off congratulations! Good job!

We have an account that we've nicknamed "Escrow." We fund it to the level that insurance and taxes are covered and pay from it.
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BoDog
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11:23a, 7/5/21
AG
In the past I always felt this exact same way, but with the thought of massive inflation on the horizon I almost feel like I should get out of cash and buy buy buy real estate-even taking on sizable debt (yes I can pay the P&I each month). This may be the wrong thread to ask but does anyone else see this school of thought?
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Diggity
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In reply to BoDog • 9:35p, 7/5/21
AG
I was thinking about moving to a different part of the city, but decided it would make more sense to just remodel our current home. Didn't want to buy in this crazy market and have my appraisal value base increased by a minimum of 30% moving forward (for one thing).

We're doing a cash-out refi because money is cheap, and you can bet I'm extending it to 30 years. In a few years, it will be like Jimbo's contract and feel like a relative bargain
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Texker
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11:28p, 7/5/21
AG
I've had a mortgage and not had a mortgage ie paid off the house.
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ElAmericano
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In reply to Troglodyte • 4:44p, 7/8/21
Clould you expand on this home title lock?
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Troglodyte
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In reply to ElAmericano • 9:16a, 7/9/21
AG
ElAmericano said:
Clould you expand on this home title lock?

A big scam now is to forge a deed that transfers ownership in your house to someone else. Then, the thief will mortgage your house.

If you have a current mortgage in place, they can't transfer title without satisfying the current mortgage. So, you would likely find out from your current lender. If you don't have a mortgage, you would never know until the new fraud mortgage is in foreclosure.

Home title lock is similar to LifeLock for your credit. It will notify you if anyone files a recorded document on your property. I know Dallas County has a free notification system. However, I think it's after the fact and they don't help you undo the fraud.
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Mortgage Man
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5:12p, 7/21/21
AG
Houses you live in are not an earning asset. I would suggest you take 80% equity out and reinvest in an earning asset. As the author of Rich Dad, Poor Dad stated...your house is a liability, and not an asset. It earns you nothing...PM me for further dialog on this topic.
Gig Em! '84

Brian@TxBestHomeLoans.com
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Mortgage Man
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5:13p, 7/21/21
AG
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combat wombat™
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In reply to Mortgage Man • 5:39p, 7/21/21
AG
Have you ever heard of appreciation? It can be significant.
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SteveBott
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In reply to combat wombat™ • 9:35a, 7/22/21
AG
Not sure about the appreciation question but he knows all about yield spreads
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combat wombat™
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In reply to SteveBott • 10:52a, 7/22/21
AG
You are also "earning" on your paid-off house whatever you are NOT paying in interest to a bank. And, unless you are uninsured and your house is destroyed by hurricane, tornado, or fire, your house will never lose all of its value (unless you live in Detroit)... an investment in an "earning asset" can lose all of its value.
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Mortgage Man
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In reply to SteveBott • 12:23p, 7/22/21
AG
From the what it's worth column, my company gives the Yield Spread Premium to the borrower as a lender credit...
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combat wombat™
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In reply to Mortgage Man • 12:58p, 7/22/21
AG
You do what you like, I prefer not being in debt. Of any kind, And I still have money to invest.
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