If you’re coming up to the end of your mortgage term, you’re no doubt excited. However, you might be wondering what happens when you completely pay off your mortgage. We’re here to help. Let’s look at what you can expect from your mortgage lender and the steps you might take moving forward.
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What do you get when you pay off your mortgage?
When you use a mortgage to buy a property, the lender usually registers a charge over the title. The concept is relatively simple. Although your name appears as the registered owner of the property, the lender’s name is also disclosed on the title deeds. It reassures the mortgage lender that you won’t sell the property without clearing your mortgage first.
When you pay off your mortgage, your mortgage lender should send an electronic notification of discharge (END) to the Land Registry. This is to remove the registered charge. You may also be required to send a Form DS2E to the Land Registry. It might be wise to consult your solicitor for help and guidance at this stage.
Your mortgage lender should also send you the property’s original title deed.
It might be in your best interest to note the following:
- Homes bought after 1990 are most likely registered with the Land Registry. However, if you bought your home before 1990, it might not be registered.
- Registering your property with the Land Registry is beneficial because it gives you proof of ownership, helps you protect your land from fraud and makes it easier for you to sell, change or give away your property in the future.
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What should I do when my mortgage ends?
The first thing you’re likely to notice is an increase in your bank balance. Since you no longer have to make monthly mortgage repayments, you get to keep the money.
It might be wise to take a moment to think about your next steps. The best course of action will depend on your personal circumstances. You could:
- Continue to live in your property and enjoy reduced expenses
- Continue to live in your property and use the extra money to pay off other debts, invest or make pension contributions
- Remortgage to rent your property – you might need a buy-to-let mortgage
- Remortgage to access cash without selling or moving
If you are looking to remortgage, it might be in your best interest to speak to a mortgage broker. The broker will present you with different options and give you the pros and cons.
Is there a downside to paying off a mortgage early?
Based on your personal circumstances, you might be considering the option of paying off your mortgage early. This could be because you:
- Came into some money
- Have been reducing your mortgage balance for years and want to see the back of the monthly repayments
- Want to convert your equity to cash
Before you pay off your mortgage early, it is always a good idea to talk to an independent financial advisor. They are trained to help you identify the risks and potential benefits based on your circumstances.
Most mortgage lenders charge borrowers early exit fees or penalties. These fees and penalties might outweigh the benefits of paying off a mortgage early. However, sometimes, especially depending on the terms and time remaining on your mortgage, the fees might not have a significant impact.
It’s important to crunch the numbers with the help of a mortgage broker or financial advisor to identify whether it is worth paying off your mortgage early.
