Mortgage Payoff Statement: Everything You Need To Know
February 18, 2023 4-minute read
Author: Ashley Kilroy
Mortgages: they’re a crucial part of the home buying process. But what homeowner doesn’t look forward to the day their mortgage disappears along with the required monthly payment?
Early payoff may seem far-reaching, but maybe you have multiple debts weighing you down and you want to consolidate them into one payment for better management.
No matter which financial goal you have, you first need a clear picture of your remaining loan amount and associated charges. That’s where a mortgage payoff statement comes in. It lays out each fee and dollar still due before you completely pay off your mortgage. Here’s how it works.
What Is A Payoff Statement?
A payoff statement for a mortgage, sometimes referred to as a payoff letter, is a document that details the exact amount of money needed to fully pay off your mortgage loan. The payoff amount isn’t just your outstanding balance; it also encompasses any interest you owe and potential fees your lender might charge.
The payoff statement is a vital document due to the interest on your loan balance, which is added daily. The exact amount due changes based on the terms of your loan, meaning that you can’t just guess the overall amount owed. If you try, you’ll likely fail to pay everything you actually owe, leading to frustration, wait times and complicated communication.
Mortgages aren’t the only type of loan that use payoff statements, either. You can request one when you borrow for other purposes as well. This statement is necessary paperwork if you want to change or consolidate your debt, too. You may not be the only one utilizing a payoff statement. Occasionally, a creditor may present you with this document if they took a serious collection action on your loan – usually on liens.
For the most part, a servicer is required to send back a payoff statement within 7 business days of the initial request.
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Do You Need A Mortgage Payoff Statement?
There are a couple of reasons why a borrower might need a payoff statement. Generally, you request it from your lender when you want to know the exact amount needed to pay off your home. But it’s possible to want that information for other reasons as well.
For example, put yourself in the shoes of a homeowner who wants to change their current debt situation. You need your mortgage’s details before you decide to refinance your loan to change your terms, lower your payment or consolidate your debt. Or, you may want to get rid of the debt altogether by paying off the mortgage early.
Anyone paying off their loan should also inquire about their escrow balance. You pay into that on a monthly basis as part of your mortgage payment to cover future homeowners insurance and property tax costs. Some homeowners can receive a portion of the balance back after paying off their mortgage.
How Are Mortgage Payoff Letters Created?
There’s a process to getting the mortgage payoff statement. First, you’ll need to contact your lender and let them know you want the information. Depending on your lender, you may have to sign in to an online account, call a helpline, or send a formal letter to start the request process. Alternatively, your lender may have a form you must fill out.
You’ll likely need to supply some personal information, such as your name, signature, contact information, account number, property address and the date you want the payoff to be effective. Some lenders will also want to know why you’re choosing an early payoff.
Generally, most mortgage payoff letters contain the same information regardless of the lender. In yours, you’ll probably find the following: the expiration date of the payoff amount, where to send the final payment, who to make the check out to, whether a cashier’s check is necessary, charges to include along with your payment and an adjusted amount in case you pay after or before the payoff date.
When reviewing your letter, make sure to check for fees, specifically administrative, recording or delivery fees.
Payoff Letter Template
From: [Your Lender]
123 Your Lender’s Address
Philadelphia, PA 19093
To: [Your Name]
456 Your Address
Philadelphia, PA 19093
Dear [Your Name],
Per your request, this letter is a payoff statement on Loan # 001-23-45 of $80,000.00. It has an annual rate of 3% over 365 days.
Payoff Statement for September 1, 2021. All obligations of the borrower for this loan will be satisfied if [Your Lender] receives payments in the following amounts by the close of business on October 29, 2021.
Fees already due by 10/29/21: $150.50
Interest due: $3,000
Loan balance: $5,450.15
Pay this amount: $8,600.65
If payment is received later than the indicated date above, include an additional $20 for each extra day.
Please make any checks payable to [Your Lender Inc.]. If you wish to use alternative payment methods, please reach out to us. We would like to reach a compromise that satisfies both parties.
Contact us with any questions you have about this process at 123-456-7890 or at our email email@example.com.
Bank Agent, [Your Lender] Senior Manager
Other Ways To Know What You Owe
Payoff letters aren’t the only way to learn about your current loan balance. You can also talk to your lender and request a verbal payoff quote. However, it doesn’t have the same weight as a letter since it’s not official or legally binding. But, it will give you an estimate of the money you still need to pay off your loan.
You can even act on that information, but don’t be surprised if it wasn’t entirely accurate. Since it’s only verbal, you take a risk by treating it as fact. However, it is a valuable way to get the ball rolling until you find the exact amount.
The Bottom Line
Payoff statements are an important document for both homeowners and their mortgage lenders. They detail the amount still owed on a loan along with the remaining charges. This can help you move forward with future plans, whether they involve loan consolidation or total payment. While these statements require some level of paperwork, they’re relatively painless to request and they’re more reliable than the alternative of a verbal payoff quote.
The next steps in your loan may be some of the most crucial. Before you act, learn more about the process and what you should consider when paying off your mortgage early.
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