News.Life

<p>
 <img data-document-id="cms/api/amp/image/AA1AKQTQ" data-reference="image" src="https://img-s-msn-com.akamaized.net/tenant/amp/entityid/AA1AKQTQ.jpg"/>
 <ul class="summary-list">
  <li>
   My mother invested some funds in a property and subsequently transferred both the initial amount and the earnings to me.
  </li>
  <li>
   When I was 23, I utilized it as a down payment for a house. I enjoyed beginning my journey in the property market early.
  </li>
  <li>
   I want my children to have the same financial advantage that I had growing up.
  </li>
 </ul>
 <p>
  I
  bought my first property
  In 2009, when I was 23 years old, I had a charming two-bedroom townhouse within a complex located on the Gold Coast in Australia, my hometown.
 </p>
 <p>
  My situation was somewhat uncommon. When I was young, I nearly passed away due to a prescription drug that led to a seizure and stopped my breathing. My mother pursued legal action and secured $20,000 in compensation, which she allocated
  buying an investment property
  (jointly owned by my parents and me).
 </p>
 <p>
  When I reached 23 years old, she gave me the initial $20,000 along with the earnings, bringing the total to $40,000. This amount allowed me to utilize it as the
  deposit for a home
  I was the first among my peers to venture into the real estate world, and it was amazing to gain an early advantage on the property ladder at such a young age.
 </p>
 <h2 data-toc-id="f35263ba-cc30-486a-a74a-b862d4fff509" id="f35263ba-cc30-486a-a74a-b862d4fff509">
  I needed to save up to cover the expenses, yet I still went ahead with the travel.
 </h2>
 <p>
  Back then, I held a full-time job as a newspaper reporter, though it didn’t pay much. The key thing I took away from purchasing real estate when young was learning how to save and manage money despite having limited funds.
 </p>
 <p>
  I realized I needed to
  cover the mortgage
  I covered expenses like water, council fees, electricity, and insurance on the property, ensuring I allocated sufficient funds weekly for these necessities prior to considering non-essential purchases. While my friends spent their money on luxury items such as designer gowns or fancy vehicles, I reminded myself that I was investing in a more significant foundation for my future.
 </p>
 <p>
  That being said, I still pursued my own desires, largely speaking. At the age of 25, I
  rented out the property
  And set out abroad for three years. During this period, I resided in Canada and London and explored various places across North and South America, then continued my journey through Europe and Africa.
 </p>
 <p>
  Once again, my pals were astonished that I managed to reside and journey overseas while still owning real estate in my hometown of Australia. However, I had developed solid saving practices. There were moments when I juggled three roles in the hospitality sector simultaneously to meet my income targets, steered clear of dining out frequently, and
  shopped secondhand for clothes
  While residing in Canada, my partner—who later became my spouse—and I decided to move in together, which helped reduce our expenses.
 </p>
 <p>
  I’ll acknowledge that it wasn’t entirely without challenges—there were certainly some tense times. For instance, as I prepared to depart from my Canadian starting point for a three-month journey through South America, my real estate agent sent an email indicating issues with my
  The tenant had damaged the property extensively.
  .
 </p>
 <p>
  He had singed burn marks from cigarettes on the furniture and inflicted harm upon the walls. This left me extremely worried when searching for replacement renters. However, the security deposit provided by the tenant helped cover much of the repair costs. Additionally, my financial cushion took care of the mortgage payments during the period the house stood empty. Ultimately, everything sorted itself out successfully.
 </p>
 <h2 data-toc-id="5a0286ad-a362-4d7c-ac1f-3563c9a2df60" id="5a0286ad-a362-4d7c-ac1f-3563c9a2df60">
  My spouse and I discovered a fixer-upper for our clan, and I managed to sell my initial home.
 </h2>
 <p>
  Once my spouse and I finally made our way back to Australia, tied the knot, and welcomed our child into the world, we decided it was time to purchase a family home. In 2017, we came across an excellent option
  fixer-upper with considerable promise
  In a burgeoning area of Melbourne known as Seaford, the property was situated approximately one and a half miles from the coast and conveniently near parks and facilities. It was ideal.
 </p>
 <p>
  I eventually sold my townhouse in the Gold Coast, whose value had increased since purchase, and used those funds as part of the down payment for our family house. Starting off with this advantage in real estate turned out to be incredibly beneficial for us, and I'm deeply thankful to my parents, especially my mother, for enabling this opportunity.
 </p>
 <h2 data-toc-id="f311f124-faf1-4cd6-b875-cb7fdab6a402" id="f311f124-faf1-4cd6-b875-cb7fdab6a402">
  I desire for my children to have the same chances I had.
 </h2>
 <p>
  Now that I am a parent to three children, I’m aiming to secure them the greatest opportunity early on for entering the realm of real estate. Recently,
  read a report
  Reflecting on the difference in property investments between men and women in Australia has only strengthened my determination to provide both my daughters and my son with the same strong foundation that I received.
 </p>
 <p>
  Two years ago, my
  kids inherited some money
  From a dear family acquaintance. The funds are in a
  high-interest savings account
  , and we contribute to it monthly through automatic payments.
 </p>
 <p>
  I am likewise conversing with a
  financial planner
  Regarding the optimal approach for investing my kids' inheritance on their behalf, I have discussed various possibilities with my elder offspring. My 9-year-old boy wishes to create a stock portfolio, whereas his 6-year-old sister believes her savings should be used to purchase an extravagant Barbie collection. Though she hasn’t fully grasped the idea of saving or growing wealth yet, we will gradually work towards understanding this concept together.
 </p>
</p>
<p>
 <img data-document-id="cms/api/amp/video/BB1k71S5" data-reference="video"/>
 <p>
  If you liked this tale, make sure to follow
  Business Insider
  on MSN.
 </p>
</p>

How My Mom's Investment Helped Me Buy a Home in My 20s—And How I'll Do the Same for My Kids

Unknown home ownership, investing, money, personal finance education, personal finance real estate

My mother invested some funds in a property and subsequently transferred both the initial amount and the earnings to me. When I was 23, I utilized it as a down payment for a house.…

<img data-document-id="cms/api/amp/image/AA19GJli" data-reference="image" src="https://img-s-msn-com.akamaized.net/tenant/amp/entityid/AA19GJli.jpg"/>
<div class="KeyTakeaways">
 <h2>
  Key takeaways
 </h2>
 <ul>
  <li>
   Settling your mortgage indicates that you now own 100% of your home outright and are no longer required to send monthly payment installments to your lending institution.
  </li>
  <li>
   After your loan is settled, you will be responsible for paying your home insurance premiums and property taxes yourself, rather than having them included via an escrow account.
  </li>
  <li>
   Deciding to pay off a mortgage ahead of schedule comes with advantages and disadvantages, hence evaluate your broader financial objectives prior to making this choice.
  </li>
 </ul>
</div>
<p>
 Losing your mortgage is a significant achievement: You completely own your home without any debts.
</p>
<p>
 So now what?
</p>
<p>
 It’s a moment to celebrate, but it’s also one that comes with certain specific steps, like ensuring you have proof that you’re the full legal owner of the property. And also that the homeowners insurance and property taxes continue to get paid.
</p>
<p>
 Let’s look at what happens when you pay off your mortgage and what you should do afterward.
</p>
<h2 id="what-happens">
 What happens when you pay off your mortgage?
</h2>
<p>
 Here are a few things you’ll need to do once you’ve paid off your mortgage.
</p>
<h3>
 Collect documents from your servicer
</h3>
<p>
 When you pay off your mortgage, your lender or your loan servicer will likely send you paperwork, confirming that you’ve fulfilled your final payment toward the loan and formally releasing your mortgage obligation. Here are some of the documents you might receive once you’ve paid off your loan:
</p>
<ul>
 <li>
  <strong>
   A canceled promissory note:
  </strong>
  This is one of the many documents you would have signed at closing, promising to pay back the amount of your mortgage. The canceled note, issued by your mortgage lender, indicates your fulfillment of that promise.
 </li>
 <li>
  <strong>
   A loan payoff letter:
  </strong>
  This document will show (down to the penny) what you need to pay off the remainder of your mortgage, plus any owed interest or fees. If you have paid everything off, it will verify that as well.
 </li>
 <li>
  <strong>
   A deed of reconveyance:
  </strong>
  This document serves as a lien release indicating that your mortgage company no longer holds any legal claim over your property.
 </li>
 <li>
  <strong>
   Escrow funds:
  </strong>
  If there is any money left in your
  escrow account
  once your mortgage is fully paid, your lender should send you a check or direct deposit for those funds.
 </li>
 <li>
  <strong>
   Property deed:
  </strong>
  This document proves that you are the sole property owner.
 </li>
 <li>
  <strong>
   A certificate of satisfaction:
  </strong>
  Your local recorder or county clerk issues this document showing that you’ve paid off the loan on your property.
 </li>
</ul>
<p>
 Once you have them, keep the documents in a secure place, like a safe or a safe deposit box.
</p>
<h3>
 Update your homeowners insurance
</h3>
<p>
 Once your mortgage is paid off, you’ll need to update your homeowners insurance policy. You should remove your mortgage company from your policy by eliminating the
 mortgagee clause
 , which entitles them to reimbursement if the home is damaged or destroyed.
</p>
<p>
 After your loan is closed, your mortgage servicer will also close your escrow account and return any remaining funds to you. Legally, the servicer must issue your escrow refund within 20 days of closing the account. You will then be responsible for paying your home insurance premiums on your own.
</p>
<p>
 Even though it's not mandatory to keep homeowners insurance after paying off your mortgage, it is still advisable to do so.
</p>
<h3>
 Pay your own property taxes
</h3>
<p>
 You'll have to arrange to get your bills sent over.
 your local property taxes
 immediately, as your mortgage company will stop covering these expenses from your escrow account.
</p>
<p>
 Based on your location, you may get one comprehensive yearly property tax statement from your municipality, which could be your city, town, or county, or alternatively, several separate invoices from different bodies such as school districts, fire departments, and utility services including sewage and water boards. For help in pinpointing all the pertinent taxation agencies, visit the records division at your local town or city hall for assistance.
</p>
<h3>
 Reach out to your accountant.
</h3>
<p>
 Once you've paid off your mortgage, inform your accountant. You won’t be making those payments anymore.
 mortgage interest to deduct
 on your tax return, which could potentially increase your tax liability.
</p>
<p>
 However, paying off your mortgage might also free up cash that you can use for other purposes. Your accountant or a financial advisor can suggest ways to leverage the money you’re saving. You might use the extra funds to:
</p>
<ul>
 <li>
  Pay off other debt
 </li>
 <li>
  Increase contributions to your retirement accounts
 </li>
 <li>
  Boost your emergency savings
  , ideally in a
  high-yield savings account
 </li>
 <li>
  Save money for a child’s college education expenses
 </li>
 <li>
  Undertake home renovations (refer to the FAQ section on
  accessing home equity
  , below)
 </li>
</ul>
<h3>
 Monitor your credit score closely.
</h3>
<p>
 Fully paying off your mortgage typically doesn’t affect your credit score much. However, after removing the mortgage from your credit record, your score might decrease somewhat due to less diversity in your debts—meaning fewer different kinds of loans. Additionally, since account longevity plays a role, and considering how long you've had the mortgage, this could also lead to a minor dip in your credit rating.
</p>
<p>
 Conversely, having a smaller mortgage balance will result in a reduced credit utilization ratio. Thus, settling your mortgage could positively influence your credit score. Additionally, informing your credit card issuers about your paid-off mortgage might allow you to boost your current credit limits.
</p>
<p>
 Usually, it can take anywhere from 30 to 60 days for your lender to inform the three major credit bureaus—Equifax, Experian, and TransUnion—that an account has been closed. This delay means your credit score may not update immediately following your last payment.
</p>
<p>
 Once you have paid off your mortgage, keep an eye on your credit report until the account appears as closed. Should several months pass and the account continues to show as active across all three credit reporting agencies, reach out to your lender and request they inform the bureaus accordingly.
</p>
<h2 id="pay-off-faster">
 Ways to Accelerate Mortgage Repayment
</h2>
<p>
 If your aim is to repay your mortgage more quickly, you essentially have two primary choices:
</p>
<ol>
 <li>
  <strong>
   Prepaying the principal:
  </strong>
  This includes allocating extra money toward the main portion of your loan, thereby decreasing it.
  total interest paid
  Throughout the duration of the loan, you can speed up how quickly your debt decreases. You have several options: making an additional full payment once-off, opting for more frequent but smaller bi-weekly payments that collectively result in one extra annual installment, or simply boosting each monthly contribution with the surplus going directly towards reducing your mortgage’s principal.
 </li>
 <li>
  <strong>
   Refinancing:
  </strong>
  Rather than opting for prepaid options, you have the choice to refinance your loan, essentially swapping out your current mortgage for a fresh one. By doing this, refinancing allows you to expedite paying off your mortgage faster—provided you opt for a shorter duration; for instance, choosing a 15-year mortgage over a traditional 30-year one with your initial agreement. However, keep in mind that although this approach reduces the overall time span, it raises the amount due per installment, barring any improvements in interest rates or similar factors.
  lower interest rate
  on the new loan.
 </li>
</ol>
<div class="my-8">
 <div class="SupplementaryLink">
  Learn more:
  Is it advisable for me to pay off my home loan ahead of schedule?
 </div>
</div>
<h3 id="pay-early">
 Is paying off your mortgage ahead of schedule advisable?
</h3>
<p>
 Certain borrowers choose to accelerate the repayment of their mortgage to reduce interest costs and increase monthly liquidity. Nonetheless, this strategy may not be optimal, particularly if financial resources are available.
</p>
<p>
 By paying off your mortgage ahead of schedule, you lose access to those readily available funds which might otherwise be used for other investments.
</p>
<p>
 As stated by Greg McBride, CFA, and the lead financial analyst at DIWIDA, "Instead of locking away funds in an illiquid investment like real estate, which may not be accessible during times of need, you could utilize those resources elsewhere. For instance, consider paying down high-interest debts such as credit card balances or personal loans, augmenting your retirement fund through increased contributions to your employer’s 401(k) plan or setting aside money in an individual retirement account (IRA), or building up your rainy-day savings."
 invest
 For other financial objectives such as funding your children’s education or investing via a brokerage account."
</p>
<p>
 You should also take into account the condition of the economy prior to making your decision.
 prepay your mortgage
 Experts typically recommend avoiding
 settling a home loan prior to an economic downturn
 since you'll utilize funds that could potentially be more important in a financial emergency.
</p>
<p>
 Paying off your mortgage ahead of schedule may not be the most prudent way to utilize your funds if you benefit from a favorable interest rate, particularly when dealing with more expensive debts elsewhere. According to McBride, "Prioritizing prepayment of your mortgage becomes less important when you're enjoying such low-interest rates—sub-4% or 5%."
</p>
<p>
 If your other monetary responsibilities are well-managed, accelerating the payoff of your mortgage could be beneficial. Regardless of whether you decide to pay it off ahead of schedule or not, after eliminating your monthly mortgage expense, you can redirect those funds towards savings and investments instead. Additionally, you will gain peace of mind from owning your home outright, providing stability should your financial situation shift.
</p>
<h2 id="faq">
 Frequently asked questions
</h2>
<p>
 Additional contribution by Erik Martin
</p>

What Really Happens When You Pay Off Your Mortgage?

Unknown home mortgages, home ownership, homeowners, money, mortgage

Key takeaways Settling your mortgage indicates that you now own 100% of your home outright and are no longer required to send monthly payment installments to your lending institution. …