A mortgage payoff statement is the servicer's written answer to one question: how much does it take to pay this loan off completely on a given date. It lists the unpaid principal, the interest owed through that date, any fees, and a "good through" date after which the figure changes. On a purchase, the closing agent orders the seller's payoff so the old loan is paid and the buyer gets clear title. On a refinance or a sale of your own home, the payoff is ordered on your loan.
Why the payoff is higher than the balance
Mortgage interest is paid in arrears, meaning each monthly payment covers the interest for the month before it. When a loan is paid off partway through a month, the interest from the last payment up to the payoff date is still owed. Servicers figure it as a daily amount, called per diem interest, and multiply by the days.
The statement can also include a fee to record the release of the mortgage and any unpaid late charges. Money left in your escrow account usually doesn't reduce the payoff. Under federal rules, the servicer refunds that escrow balance within 20 business days after the loan is paid in full.
Your rights when you ask for one
Regulation Z requires the servicer to send an accurate statement of the total needed to pay the loan in full as of a specified date. It has to arrive within a reasonable time and no more than seven business days after a written request from you or someone acting for you, such as the title company. Loans in bankruptcy or foreclosure, reverse mortgages and loans hit by a natural disaster get a looser "reasonable time" standard.
A worked example with per diem interest
A seller owes $210,000 on a loan at a 5.75% rate. The regular payment on the 1st covered interest through the end of the prior month, and closing is set for the 20th.
| Item | Math | Amount |
|---|---|---|
| Unpaid principal | $210,000.00 | |
| Per diem interest | $210,000 × 5.75% ÷ 365 | $33.08 a day |
| Interest owed for 20 days | $33.0822 × 20 | $661.64 |
| Release recording fee (example) | $40.00 | |
| Payoff good through the 20th | $210,701.64 |
If closing slips five days, the payoff grows by $165.41 ($33.0822 × 5). That's why title companies ask for a payoff good through a few days past the scheduled closing. Some servicers use a 360-day year, which raises the per diem slightly.
What to do with yours
- Keep making your monthly payment until the loan is paid off. A missed payment adds interest and a late charge to the payoff.
- Check the good-through date against the closing date.
- Watch for the escrow refund check after closing.
- On a refinance, the payoff sets how much new loan you need, so ask us to order it early.
Selling one home to buy another changes your cash picture. Put the numbers in the cash to close calculator, then call AAA Capital Funding at 888-601-8344 and we'll order the payoff and line up your purchase around it.