Post-Mortgage Life

Published 2/4/2025

 

Spotify logoApple Podcast logoiHeartRadio logoAmazon Music logoYouTube Music logoYouTube logo

View Video

Drew Thomas  0:12  
All right, so once again, we are back with another episode of 2 Cents. So, we're going to talk today a little bit about what happens when you pay off your mortgage?

Jeff Matevish  0:21  
Yeah. So, we've talked about mortgages in the past with, you know, the full-length Bank Chats, episodes with David O'Leary and but we've never really talked about, okay, once your mortgage is paid off, what happens?

Drew Thomas  0:31  
Yeah, yeah. I mean, that's a good point. So, you know how much I love stats. So, you found some stats.

Jeff Matevish  0:36  
I pulled a Drew, I did.

Drew Thomas  0:37  
Lay them on me. Okay, what stats do you got?

Jeff Matevish  0:39  
So, they're two short ones. So, Americans owe $12.59 trillion on 84.94 million mortgages. So, that comes out to an average of $148,222 per person with a mortgage on their credit report.

Drew Thomas  0:55  
That sounds about right for me.

Jeff Matevish  0:58  
And this represents 70.2% of US consumer debt. The other one was the average purchasing, so we had talked in the past about purchasing prices for housing, yeah, and that has gone up a little bit since we last mentioned that. So, the average purchase price for a home in the US the end of Q3 in 2024 was $501,100 so about $50,000 more than what we had mentioned, probably Q3 something like that. That is crazy to me, $50,000 in less than a year.

Drew Thomas  1:28  
Yeah. Well, not only that, but that a half a million dollars is the average price, yeah, of a home in the United States at this point.

Jeff Matevish  1:34  
Not probably around our area, but yeah, you factor in some of those Beverly Hills houses, yeah.

Drew Thomas  1:36  
Yeah. I'm really, I'm really shocked by that. I mean, if my grandfather knew that a half a million-dollar house was now considered the average, I think he would be rolling over. Oh, yeah.

Jeff Matevish  1:52  
I remember, I remember there was something I saw online probably about a year or two ago, and it was talking about housing prices back in the day, like when you could buy pretty much a house from like, a Sears catalog, oh yeah, and, well, you could, like, you could build a house for like, $15,000 back then.

Drew Thomas  2:08  
Yeah, yeah. It was ridiculous. It's actually amazing. I watched a whole documentary on Sears homes, okay, at one point, and I don't know if you realize it, but I mean, at the time, Sears was like the Amazon of, Oh yeah, right. And you literally could, you could buy a home from a kit, and they would come on rail cars, and you would get your friends and your family and whatever, and they would literally help you put together your home from a kit. And you could build a house. And you can still find them all over the country. You can find Sears homes, because when you go online and you look at the design of the homes, yeah, and then drive around your community once, and you'll be amazed at how many of them, you're like, I recognize that. I recognize these.

Jeff Matevish  2:44  
Because they're pretty much cooking cutters, right? For the most part, yeah.

Drew Thomas  2:48  
But I mean, some of them were pretty elaborate, oh yeah. You know, type of homes as far as design, you know, the columns and the, the spires they had, you know, conical roofs and all the kind. I mean, it was, they were, they were nice looking homes in some cases, but, but, yeah, and, and if you go into the homes, usually you can tell if it's a Sears home, because if you go downstairs, if you can see the, the floor joists and the beams you, you can sometimes still find shipping markers and Sears logos, if they're like, stamped on the wood. That's, neat. Yeah, yeah, it is kind of neat. So, yeah. So, anyway, so, so half a million dollars is the average. And then you said, what up? Say $149,000 we'll round up about $149,000 per, per person who has a mortgage is currently out there.

Jeff Matevish  3:32  
Yep, yeah. So, let's talk a little bit about some pros and cons of paying off your mortgage early, or maybe not even pros and cons, but some things keep in mind, okay, um, because one, one person may think something's a pro, but it could be a con to another. So, yeah, okay, so it depends on your financial goals, interest rates and alternative investment opportunities, sometimes investing your money elsewhere, rather than paying off your mortgage early, could get you ahead a little bit financially.

Drew Thomas  3:59  
Okay, so you're saying put money in your 401k, right, or into a stock market, right. Some sort of investment type thing, right.

Jeff Matevish  3:59  
Something with a higher interest.

Drew Thomas  4:05  
Something that's a theoretically making interest for you is what, is what you're, is what you're arguing, correct? Yes. Okay, so alternative investments, all right, what else we got?

Jeff Matevish  4:18  
So, sometimes paying off other debts first are more important. Maybe consider paying off higher interest debt before paying off a house. We've referred to this as the Debt Avalanche, or Debt Stacking method. We talked about this in the George Kamel's episode, actually a little bit. We did. Yeah, so higher interest rates pay off first, versus a lower interest rate, which is going to be most likely your mortgage, since mortgages are fairly low on the spectrum of interest rates, yeah.

Drew Thomas  4:45  
Yeah. I would, yeah. I would agree. I mean, some people would argue that interest rates on housing are super high right now, you know, comparatively to other things compared to your credit card. It's, you know, and you know, yes, it's a much larger sum of money that you're, that you're paying interest on, because the house is, although there are probably some people out there that have $100,000 in credit card debt, I'm not saying that they are not, but yeah, I get your point. So, two things, you know, just to recap, we have either putting that money towards something that's making you money, hopefully, right? No, no investment is guaranteed. But theoretically, if you're putting your money in an IRA or 401k or something that money is, is making you money for the future. And then also just considering the fact that, you know, you're not, maybe focused on paying down debt that has a higher interest rate than your home, okay, right? You know, the other thing I was thinking is, you know, there used to be, and I don't think it's as common as it used to be. There used to be prepayment penalties if you paid off your mortgage early. Oh, I don't really think that's as big of a deal as it used to be. No, but there it used to be one of those things where, because, if your lender is expecting your payment to be coming in for the next 30 years, they're kind of budgeting for that. They're saying, okay, well, we're expecting to have this amount of money coming in over this amount of time, and then suddenly, you know, a bunch of people just decide to pay off their mortgages early. Well, now that money that they were counting on is no longer coming in.

Jeff Matevish  6:06  
Oh, yeah, that makes sense.

Drew Thomas  6:07  
Right? So, they used to have prepayment penalties on some of that stuff, yeah, yeah, yeah.

Jeff Matevish  6:12  
So, but even you could also look at the economy, you know, you may need that money that you're going to use to pay off your mortgage early for an emergency. So, if the economy tanks, your money is going to be worth a little bit more if that happens, so you may want to save some extra money, yeah, not just put all of it towards your mortgage right off the bat.

Drew Thomas  6:31  
Yeah. I mean, if you, if you need to buy groceries, that extra mortgage payment isn't going to suddenly give you the money to be able to feed your family, right? So, liquid income, liquid, yeah, yeah, yeah.

Jeff Matevish  6:41  
So, does paying off your mortgage hurt your credit score? It can ding your credit score a little bit when you close your mortgage, but while you're paying your mortgage off, it, paying extra payments will not hurt your credit score.

Drew Thomas  6:52  
Okay, yeah, well, I mean, yeah, I guess that makes sense. But we've talked about credit scores in the past, and how some of the stuff that goes into calculating your credit score includes routine payments, on time, payments and length of credit, yeah, all of which are probably among the largest ones when you're talking about your 30 year mortgage or a 15 year mortgage, even so, if you're making those payments on time and you're, you're making them for 15 or 30 years, that that's a big deal on your credit score. So, making the payments early doesn't necessarily hurt your score, but paying off your mortgage early overall might, now I can't imagine it's gonna lower it by a lot.

Jeff Matevish  7:28  
No, and it's not gonna lower it for very long, but you're removing that long standing credit from your credit mix. So, yeah.

Drew Thomas  7:34  
Okay, well, that makes sense, yeah. All right, so assuming I do want to pay off my mortgage early, okay, right? There's a couple of ways that we can possibly do that. So, one option is to make extra payments, sure, right? So, I can make extra payments, but what you want to make sure you're doing is making your extra payments to your principal. Okay, yep, right. So, if you just make an extra payment, that's going to include, that's, that's a payment into your escrow, which is also paying your theoretically, possibly, depending on how your escrow is set up, they're not all the same, possibly paying your property taxes, probably paying your home insurance. It's paying interest on the loan, right on the on the mortgage itself, right. So, if you're going to try to make extra payments to pay it off early, you want to see if you can make your routine payment for that month and then make an extra payment that is on the principal only.

Jeff Matevish  8:20  
So, you would talk to your, your mortgage lender and make sure that that is going towards that principle.

Drew Thomas  8:24  
Right. Because you're making your regular payment which satisfies your interest and all that stuff, yeah, but your extra payment should theoretically be for the principal only on the loan, okay.

Jeff Matevish  8:34  
Well, and then an easier way to do that too, some people will pay twice a month, so your normal mortgage payment you're paying once a month, divide it in half and pay it twice a month by the end of the year, that'll give you one extra payment towards your principal. So, you're paying 26 half payments.

Drew Thomas  8:51  
Yeah, yeah. That's true, yeah, 26 payments, but if you were making, yeah, you if you were making one payment a month, it would be 12. So, 12, but you're paying 26 you're actually getting an extra because you're not actually just paying it twice a month, you're paying it every so many weeks. Right. Is what you're saying. Okay, yeah, no, I get what you're saying, yeah. And then I guess the, the third and, the third option is to refinance at a lower interest rate, right. If you, if you have a higher interest rate on your, on your home mortgage, which at this point you'd have had to buy your house probably 10 years ago to have a higher interest rate than, than when a lot of people had, say, five years ago around COVID time. But if you do have a higher interest rate, you could theoretically try to refinance your home at a lower interest rate, and that might help you pay it off faster.

Jeff Matevish  9:35  
And just changing the term might even affect that interest rate as well.

Drew Thomas  9:38  
Going from say, like a 15 to a 30, something like that, yeah, yeah. If you can afford to do that, and you can afford to take on the higher payment, you know, to pay it off early, you could, you could potentially do that too, right. Yeah, okay, so let's just pretend that I've paid off my mortgage. Okay, whether, whether I've paid it off when I'm 70, when I'm supposed to at this stage of my life, or I paid it off early. Yeah, now what? So, so you paid it off early. What? What?

Jeff Matevish  10:03  
So, you're going to get, you're going to get some, some documents in the mail. So, you're gonna get a declaration that the mortgage has been paid off in full. Sometimes they call that a loan payoff letter. Okay, you're gonna get your promissory note that you signed back when you set up this mortgage with it canceled out.

Drew Thomas  10:17  
Okay, so you want to make sure you have that, because, right? You're actually that's, that's the thing that says you owe money, right, right, right. Okay, gotcha.

Jeff Matevish  10:25  
So, you're gonna get a deed of reconveyance, which is a lien release, confirming that your mortgage company no longer has a legal interest in your property.

Drew Thomas  10:32  
Okay, so what does that so, what does that do? What does that do for me? I mean, that's got to mean that you owe money. Well, yeah, but I'm saying that's releasing them so, so theoretically, if something happens, they can't come after they can't come after you and try to take money from, from your property, because they no longer have a legal interest in your property, right. You paid it off. Right, right, right. Again, having that promissory note that says it's canceled is a big help in that regard. Yes, yeah, gotcha. Okay, next.

Jeff Matevish  10:56  
Um, they're gonna close your escrow account. If there's any money left in it, you're gonna get that refunded, I think within 20 days, okay. They have to, they have to refund that escrow. Many lenders will also file a certificate of satisfaction with municipal authorities that maintains property deeds. So, you're going to get your deed. Yeah, which is a big one, yeah, the mortgage lender is going to be removed from the deed, I guess, yeah.

Drew Thomas  10:56  
I guess that would be the thing. I remember the first time that I ever completely paid off a car and I actually got the title, I know, yeah, the bank had it, yeah. And they sent me the title. And I was like, wow, this is mine. Like, yeah, you know. And then I sold it, no, yeah. And then I guess...

Jeff Matevish  11:36  
Once your lender has told you the document has been filed, you got to contact your local record office confirmed that those have been filed completely.

Drew Thomas  11:43  
Okay, all right, that makes sense. I guess there's some other things you probably want to do then too. Because once you paid it off you we've kind of, we've kind of talked about this in other episodes, and we talked about this in the lottery episode, like just owning a house, like straight up saying, okay, I'm gonna, I'm gonna take my lottery winnings and buy a house, right, there's other expenses that go along with that go along with that house. So, you mentioned about your escrow account. So, if you have an escrow, if you have an escrow account, that you use to pay certain things that you didn't have to worry about, right. So, that would pay your property taxes, that would pay your homeowners insurance, yeah. So, and you said you have, what, 20 days, 20 days that they have to refund your money, right. So, when you get that money back, you got to put that away somewhere, because you're still responsible for paying your property taxes and your homeowner’s insurance and whatever. So, in some cases, probably an HOA membership or whatever, because if you have a homeowner’s association or something like that, where you live, true, true. So, so just don't, don't forget about that, I think is the thing is just making sure you understand that you're going to set up a process by which you pay those things. Whether you save up all the money and pay your property taxes once a year, when they come to your house and make sure that they're being mailed to you. That's a good one, yeah. Because if they're not, if they're still being mailed to the escrow company, you got to make sure that they're being mailed to you, so you know what you owe. Yeah. You know? Yeah, that's important. Yeah, definitely important.

Jeff Matevish  13:00  
And your mortgage is no longer accounted on your taxes either. You no longer, you no longer have mortgage interest to deduct on your tax return.

Drew Thomas  13:01  
So, that's so that actually is you could probably consider that something in whether you should pay it off early too, because you are getting a tax deduction. Yeah. Now, you know you also have all that money that you're no longer paying on your mortgage. So, six and one-half dozen of the other, but you can't deduct the mortgage insurance on your taxes anymore once you've paid off your house, right. So, that is something to consider, too. That's true, all right, right. So, so what do I do with all the extra money that I have now that, I mean, I guess...

Jeff Matevish  13:37  
You roll around in it! Yes. No, yeah, I mean, you can open an IRA. You can contribute more to your 401, K, put it somewhere safe that can maybe grow you a little bit more money.

Drew Thomas  13:49  
Yeah, yeah. And we kind of talked about that at the very beginning here, right about, you know, pros and cons of paying off your house. I mean, if you have that money to set aside, you know, I mean, we've talked a lot of in the in the past about retirement and saving for retirement, and how that interest grows compoundly. You know, compound interest grows. If you can put, how can I say this? Is, is it more beneficial to you to spend an extra $1,000 a year making that extra mortgage payment? Okay, right to pay off your mortgage a few years early? Or would you be better off putting that extra $1,000 a year in your 401k, where it can theoretically compound and earn you interest and give you money at retirement. Yeah. So, I do understand the, you know, the I understand the desire to pay off your house early, but you got to think those things through, I think a little bit. Yeah, yeah. So, so there's a lot of stuff here that we can break down, obviously, and there's stuff on our website, right?

Jeff Matevish  14:45  
So, if you go to ameriserv.com/library, we have a financial library with a whole bunch of articles and calculators and coaches that can help you.

Drew Thomas  14:52  
Yeah. I mean, that's definitely something to consider, you know, it's um, and just like anything else, you know, if you, if you have a good financial planner, if you have somebody that's, that you work with as your, as your sort of financial guru, than is a qualified financial expert or something. Talk to them, yeah, you know, ask them, is it better for me to pay off my mortgage early? Is it better for me not to? Find out, you know, based on how much extra money you have available to you, where is it best going to serve you? You know, don't necessarily have to make these decisions for yourself in a vacuum. If you have a qualified financial professional that you trust, talk to them, yeah, you know, and find out what they think.

Jeff Matevish  15:28  
Very well said, yep.

Drew Thomas  15:30  
Thanks. It's almost like I get paid to do this, and you do too, which is awesome to say that. Yeah. All right. I think that, I think that pretty much wraps it up, yes?

Jeff Matevish  15:39  
I think it does.

Drew Thomas  15:40  
All right, Jeff, thanks.

Jeff Matevish  15:41  
Thank you, Drew.

Drew Thomas  15:50  
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts with the goal of helping to take some of the mystery out of financial and related topics, as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast and any resources available for download from our website or other resources relating to Bank Chats is not intended and should not be understood or interpreted to be financial advice. The host, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The host of Bank Chats is not an attorney, accountant, or financial advisor, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation.

Drew Thomas  16:57  
Thank you for listening. Please check out our full library of episodes which can be found on the ameriserv.com website. You can also download or stream the podcast from your favorite podcast app.

Comment via Text Message

Leave a Comment on Our Website

You've reached the end of your 15 or 30 year mortgage, and you are about to have your home fully paid off. Now what? On this episode of 2 Cents, Drew and Jeff chat about what happens after your last payment.

Additional Resources:
Financial Library - Housing


Credits:
An AmeriServ Financial, Inc. Production 
Music by Rattlesnake and Millo
Hosted by Drew Thomas and Jeffrey Matevish 

Post-Mortgage Life

View Video
      • Please enter a valid phone number
      • Comment/Question is a required field
      • reCAPTCHA is a required field

      DISCLAIMER

      This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts, with the goal of helping to take some of the mystery out of financial and related topics; as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast, and any resources available for download from our website or other resources relating to Bank Chats is not intended, and should not be understood or interpreted to be, financial advice. The host, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The host of Bank Chats is not an attorney, accountant, or financial advisor, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial, Incorporated.