How are mortgage payoffs calculated?
The settlement agent will obtain a payoff statement from any lender who has a security interest in your home, and we are obligated to accept that figure (you may challenge it if you think it is wrong though). Many times sellers erroneously estimate their payoffs because they do not consider or understand that interest is paid in arrears on a house loan. For example, if you have a principal balance of September 1 but are closing on September 30, then your payoff will include accrued interest from September 1 through September 30. That amount of interest can be nearly the amount of your house payment. In addition, since the payoff does not arrive in the lenderís hand as of the day of closing we will add several days to account for transit and processing.

Posted By: Brian D. Lytle, Esq. on Tuesday, February 01, 2011