What happens when you pay off your mortgage UK?

In this brief blog, we are going to discuss what happens when you pay off your mortgage in the UK.

What happens when you pay off your mortgage in the UK?

Paying off your mortgage is a very exciting feeling and there will be lots of people who are excited to pay off their mortgage and so inquisitive as to what happens when you pay off your mortgage in the UK. 

Once you have paid off your mortgage in the UK, your mortgage lender will write to you providing you with your title deeds and also a closing statement letter showing that you have now repaid your mortgage in full.  

Your mortgage lender may also charge you a mortgage exit fee so they can take care of the necessary admin work required once you have paid off your mortgage.

If you haven’t received any letter from the mortgage lender then you should contact your mortgage lender requesting them to send you the necessary documentation showing that your mortgage has now been paid in full and that any charge on your property has now bene removed. 

Check the mortgage lender has relinquished interest

If you are still unsure if this has been done then you can contact HM’s land registry to see if any charges are still on your property from the mortgage lender.

 The mortgage lender must have removed their name from your title deeds so be sure to check for this once you have received your title deeds.

If your mortgage lender has not relinquished any interest it had in your property then you may find that this resents you with significant issues and delays in the future if you are trying to sell your home or borrow from your home.

According to Lisa Shenton, a partner with law firm Irwin Mitchell, mortgage lenders failing to discharge their interest in a home account for “30 per cent of post-[sale] completion delays”. Likewise, Sheetal Bahal, head of residential property at legal firm Clarkson Wright & Jakes, says she often comes across title deeds where previous lenders are listed. “Yet the client tells you they paid off the mortgage 10 years ago.”

“If you’re paying off your mortgage, you should be chasing your lender for forms DS1 and End1, so that you can ensure their interest in the property is relinquished,” says Ms Shenton. “And keep chasing – don’t think that because you’ve made the last payment, the account is clear.”

If a mortgage lender fails to remove any interest they had in your property and this causes you to have serious delays in the future then you should complain to the mortgage lender and then complain to the financial ombudsman if you are not satisfied with the mortgage lenders response.

Inform your home insurance & third parties

If you had a home insurance policy or any other agreement which was linked to your mortgage then you should inform these third parties that your mortgage has now been paid off and you no longer owe the mortgage lender any money.

If you do not inform the third parties that your mortgage lender no longer has any interest in your property as you have paid off your mortgage then you may find that future correspondence or things such as making a claim on your home insurance policy may involve your mortgage lender.

Cancel your direct debit

Once you have paid off your mortgage in the UK, you should ensure you have now cancelled your direct debit so you avoid sending free money to the mortgage lender and having to go through the difficult process of recovering those funds.

Check your credit report

Another important factor is to check that the mortgage account on your credit history has now been closed and shows that your mortgage has been paid in full and you don’t have any mortgage balance.

If your credit report does not show that you have paid your mortgage in full then you may find that this affects your ability to get a mortgage.

You can check your credit report from any of the four credit bureaus in the Uk: Crediva, Experian, Equifax and Transunion. 

You can get a free statutory credit report if any of these services charge you or alternatively you can get your credit report from services such as checkmyfile and clearscore.

What documents can you expect after you pay off your mortgage in the UK?

The documents you can expect to receive after you have paid off your mortgage in the UK include:

Your mortgage closing statement

Your title deeds from the mortgage lender

What to do with extra money after mortgage paid off?

Paying off your mortgage in the UK means you now own 100% of the equity in your home and your mortgage balance is now £0. The mortgage lender will now remove the charge they had on your property and your mortgage agreement will come to an end.

When you pay off your mortgage you will now have extra income which you can use to do whatever you want to do as you will no longer be paying your monthly mortgage repayments.

You can now use your money to do whatever you feel like doing as your disposable income has now increased. Below are a few things you can do with the extra income when you pay off your mortgage.

Once you have paid off your mortgage you can do the below with the extra income:

Invest in an ISA account

Get a new mortgage on a buy to let property

Invest in your kids savings account

Do a home renovation yo boost the value of your home

Buy a second residential home

Go on a family holiday

Retire from work

How can I pay off my mortgage in 10 years?

Yes, you can pay off your mortgage in 10 years but this depends on your financial circumstances. If you want to pay off your mortgage in10 years then you may need to overpay your mortgage and constantly remortgage to the best mortgage options. You can also sign up to a mortgage management platform which will let you know how much of your mortgage you need to overpay by in order to repay your mortgage in 10 years.

Can you take out a mortgage on a house that is paid off?

Yes, you can take out a mortgage on a house that is already paid off. This means you are borrowing from the equity you already have in the property.

Is it worth paying off mortgage?

Depending on your circumstances it may be worth paying off your mortgage. If your debts are costing you more than your savings are earning you then it’s always thought as the best option to pay off your debts. You should seek financial advice on if paying off your mortgage may be worth it for you.

What is the average age to pay off a mortgage?

The average age most people pay off their mortgage is between 55 and 60 years old but this is getting much higher as most people are taking on their mortgage at a later stage in their life due to the rising costs of buying a property. This means most people will pay off their mortgage when they have already retired.

Getting a mortgage to pay off your mortgage

You may want to consider using an independent mortgage broker to get a mortgage which you could then use to pay off your existing mortgage.

This is known as remortgaging.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief blog we answered the question “  what happens when you pay off your mortgage uk”. If you have any further comments please let us know in the comments below.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.