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You’ve paid off your mortgage! Now what?

May 24, 2019

May 24, 2019

Paid off your mortgage? Woo-hoo! Break
out the champagne and celebrate the freedom you must now feel! But once the
dizzy excitement has passed, what will you do next?

Discharge
or not?

The first question is should you
discharge your mortgage? You can keep the loan facility open, with a zero
balance, and retain the option to redraw on the loan account if you wish. This
can be a handy way of meeting unforeseen expenses in the future, or opening up
investment opportunities.

If you decide to close your loan account
check first if there are any costs involved. For example, you may lose an
associated credit card. Or you may be up for substantial break fees if you’ve
paid off a fixed rate mortgage early.

One of the traditional delights of
closing out a mortgage has been receiving your title deed. However, with many
states moving to digital land titles settlement processes this will become an
increasingly rare pleasure. If you do happen to receive a paper title, remember
it is an extremely valuable document that requires safe storage – perhaps with
the solicitor who holds your will.

Cash
flow and equity

With your mortgage paid down to zero but
still open, a number of opportunities arise. The best one is the extra cash accumulating
in your bank account. Do you want to spend this on lifestyle choices such as
home renovations, holidays or regularly dining out? Or maybe save it for a
rainy day? Or use it to boost your retirement savings through salary sacrifice?
(You can, of course, do a bit of each).

Then there’s the equity in your home to
consider. It may seem strange to celebrate the paying off of your mortgage by
immediately redrawing on it, but if done wisely, investing those redrawn funds
in a portfolio of sound investments could hasten the day when you reach
financial independence. You may also reap some tax benefits. 

Explore
the options

Perhaps you want to simply enjoy the
freedom of being mortgage-free. Whilst this is a great choice, if you want to
investigate the wealth creation opportunities that open up once your home is
paid off always seek professional advice.

Your
financial planner can help you explore a range of options that are appropriate
to your circumstances. With a well-crafted financial strategy and a little
patience you can look forward to celebrating more of those woo-hoo moments in
the future.

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The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should consider your own financial position, objectives and requirements and seek personalised advice before making any financial decisions.