Loan Payoff Tips During your Mortgage Refinance

Loan Payoff Information

A major consideration when paying off your mortgage that most people don't think about is your actual mortgage payoff amount. Most people just go online or glance at their last mortgage statement and assume that their principal balance will be their payoff.

If you follow that advice you will be in for a surprise at closing. Since mortgage interest is paid in arrears your payoff will always be higher than your principal balance.

A good rule of thumb is to take your principal balance and add 1 mortgage payment to it. The final payoff should not be more than that.

You can request a payoff quote from your lender to determine the exact payoff amount. This payoff amount will only be good through a certain date and after that date it will increase daily by what is called a per diem interest.

For example if your loan balance is $100,000 and your rate is 6% then your interest would be $6,000 per year. Divide that by 365 days and you get a daily interest amount of $16.44 per day. This is the amount that will be added to your payoff amount for each day after the payoff expires.

Most title companies will add 2-3 extra days of interest to the payoff just to make sure the payoff is not short.

If you make a mortgage payment during the process you should request an updated payoff after the payment has posted.

If you overpay the payoff, your mortgage company will refund you the over payment usually within 2-3 weeks.

Your payoff statement should also reflect if you have an escrow account balance. If you do have an escrow account balance, your mortgage company will usually refund you the balance within 2-3 weeks on this as well.

The main thing is to request a payoff quote early to determine what your payoff will be so that there are no surprises when it is time to close.

Feel free to contact us with any questions or for a free consultation.


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