Mortgage Payoffs

Posted on November 16, 2014 · Posted in Mortgages

Conventional mortgages as opposed to privately held loans collect their money retrospectively as opposed to prospectively, as one pays rent. When people are selling their homes and paying off a mortgage sometimes they are confused about the payoff figure presented by the bank. Here is an example. Your closing takes place on the 24th of the month, let’s say Friday, October 24th. 2014. You are current on your loan having paid the October mortgage payment. The November payment is not yet due. You know that your principal balance is $300,000. But when you get your payoff figure there is a charge of 28 days per diem interest, which in this example let’s say adds $2,100 ($75 a day) to your payoff amount. This can be an unpleasant surprise. This happens because when you made your October payment you paid the principal and interest through September 30th. When the payoff letter is requested, a date of when the bank will receive its money must be provided to the bank. In this example the closing is taking place on a Friday, so even if sent by overnight mail, the bank will not get their money until Monday, 3 days later. Also in this example the payoff figure added an extra day, “just in case”. When the bank receives the payoff check any extra money will be returned to the mortgagor (the one who pays the mortgage) within 30 days. If the bank was collecting money to pay real estate taxes, any money left in that account will also be returned at this time, unless it was credited to the mortgagor in the pay off quote. Many banks will charge a fee for the payoff quote if it is requested to be faxed instead of sent by first class mail. This can be another $25 – $50. In Westchester county, as well as nearby counties in lower NY state, it is the title closer who takes care of this for the seller. The title closer will charge a “pick up” fee for this service often $150 – 250 per loan. Some sellers ask if they can send the payment to the bank themselves to save on this fee. Unfortunately the answer is no. The title company is insuring to the purchaser that the mortgage has been paid off, and they want to be sure they know this actually occurred. Consequently they are unable to take the word of someone who is not working on their behalf that they will take care of this for the title company.