Brian T. Jones, CFP®
Brian T. Jones, CFP®Chairman, Financial Adviser, Principal

A funny thing happened to my household in 2021; we paid off our mortgage. No more monthly payments, no more increasing tax escrow from the county every 12 months, no more mortgage statements from the lender and no parade or great fanfare.

The decision to pay off a mortgage is unique to each specific client/household. My wife, Amy, and I have always saved above and beyond and viewed debt as a necessary “evil” at times, but not something we wanted long term in our household.

The decision to pay off a mortgage also comes with numerous tax considerations that should be thoroughly explored with your tax professional. Not all parties may benefit as much as they would like from the removal of the tax deductibility of mortgage payments on their annual tax returns.

In our case, we agreed that paying off the mortgage was best for our household and over the last decade we moved to accelerate payments beyond our monthly scheduled mortgage payment.

Once a loan is paid off and you have received “proof” from your lender, you need to remember to contact 2 very important parties.

  1. Property & Casualty Insurer: Let them know that your loan has been paid in full and to ask them to send you the annual notice for the homeowners insurance policy premium. This is very important as part of your monthly payment will no longer be set aside to cover this premium. Your insurer will bill you directly.
  2. Office of your County Tax Commissioner: For us, this was the Fairfax County Department of Tax Administration Real Estate Division. In our case, real estate taxes are due on July 28th and December 5th each year. Tax bills are mailed 3-4 weeks prior. When we had a mortgage, part of our monthly payment was set aside each month to pay these taxes and the county would just bill the mortgage company. Now that we own the home outright, we are directly responsible for these tax payments every year.

Please note that this article is neither meant as financial planning advice nor an endorsement to pay off your existing mortgage loan(s). Its purpose is to make newly mortgage-free homeowners aware that they are now directly responsible for payment of their homeowners insurance as well as the real estate tax assessments for their given location.

If you have questions about your personal situation, please reach out to CJM to discuss it in greater detail.