How To Calculate A Mortgage Payoff
Thursday, December 09, 2010
Its no secret that home values are low. As a result, many sellers are bringing funds to closing instead of receiving a proceeds checks. Oftentimes, at the closing the Seller will question the payoff amount due on their mortgage. We thought you might like to better understand how a mortgage payoff is calculated.
Here are the components of a typical payoff:
1. Principal Balance: this is the balance on the loan since the due date of the last payment (not the payment date, the closing date, or the “late date”).
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2. Interest on the principal balance that has accrued since the due date of the last payment (this interest will be daily for conventional loans and monthly for FHA loans).
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3. Mortgage insurance premiums due for each monthly payment that is behind or currently due.
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4. Late charges for every month that a payment was late, including the current month if the payoff will be received after the late date (which is usually the 15th).
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5. Escrow Deficit: if the funds in the escrow account were insufficient to pay the most recent tax or insurance bills. Please note that most payoffs will not give a credit for a positive escrow balance - refund will be issued after closing.
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6. Cancellation fees, fax fees, release fees which the run anywhere from $25 -to- $150 each.
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7. Prepayment Penalties, if applicable.
- Scott Askew
Posted in: Intown Atlanta Real Estate News