A mortgage is a method of financing real estate. A buyer puts down a specific percentage of the purchase price, such as 20 per cent of the agreed-upon price. This down payment is usually in cash. The rest is financed via a mortgage. Mortgages are usually paid off in monthly payments for a given time frame such as 15 or 30 years.
When you pay off a mortgage, that means you no longer owe the bank holding the mortgage any money on the mortgage. This means you will no longer get a monthly statement asking for payment of the loan on your house, and you now own the property free and clear.
Once you've made the final mortgage payment you should get your promissory note and a deed of trust in the mail. Both should be stamped or have handwriting with the words "paid in full" on them. Your lender may also send you what's called a "satisfaction of mortgage" document. Make copies of these documents. Keep the originals in a safe and secure place such as a bank vault in case disputes should arise later about the mortgage.
Make sure you call the bank and cancel any mechanism that automatically withdraws the monthly mortgage from your accounts. Also check with your local Register of Deeds office to make sure the bank has filed the necessary paperwork relinquishing its lien on your home. If it hasn't, you will need to take the documents you have received to the office to get the lien released.
Advantages and Disadvantages
Paying off a mortgage has advantages and disadvantages. You will no longer face the possibility that missing or being late with a payment means you will have a stain on your credit rating. If you had a mortgage that was subject to interest rate changes you will no longer have to worry that your monthly payment will increase. On the other hand paying off a mortgage, means you may no longer deduct the interest on the mortgage from your taxes. This may mean an overall increase in the taxes you pay, thus offsetting any saved costs from paying off the mortgage.