ripvanwinkle
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All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
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Post by ripvanwinkle on Jun 25, 2020 21:32:15 GMT -5
I was eating lunch today with a coworker Gary and he said he and his wife were going to pay off their mortgage. He said his statement balance was $41k (I rounded it down). He didn't say who held the mortgage. They have been paying extra payment on the principle for years. He said when he called the mortgage holder for payoff amount the balance was more than the statement balance.
Is this possible? How is it possible? Where would that extra money come from? I had to go back to work so I didn't ask him much more but it piqued my interest.
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nidena
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Post by nidena on Jun 25, 2020 21:35:23 GMT -5
Payoffs don't happen instantaneously so banks add interest for, say, ten days to the current balance to provide a payoff amount.
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ripvanwinkle
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All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
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Post by ripvanwinkle on Jun 25, 2020 21:52:28 GMT -5
Payoffs don't happen instantaneously so banks add interest for, say, ten days to the current balance to provide a payoff amount. Ok that makes sense but he said it was a couple thousand dollars. I could see a few hundred but dollars but a few thousand?
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Deleted
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Post by Deleted on Jun 25, 2020 22:08:32 GMT -5
Payoffs don't happen instantaneously so banks add interest for, say, ten days to the current balance to provide a payoff amount. Ok that makes sense but he said it was a couple thousand dollars. I could see a few hundred but dollars but a few thousand? Yeah, that's weird. My CU lists my payoff amount online every day and today it's about $230 more than statement balance for 24 days of interest in June.
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tallguy
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Post by tallguy on Jun 25, 2020 22:11:59 GMT -5
The payoff balance will always be more than the statement balance. If they are using the statement balance from June 1, they have accrued almost a full month of interest since the last payment. Interest will also be charged up until the payoff is received. There will also likely be certain fees involved in the payoff process, though those should not be much. I never had an escrow account on any of my mortgages, but I would guess that if there was an imbalance in that account it would also affect the payoff amount.
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Tiny
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Post by Tiny on Jun 25, 2020 22:16:54 GMT -5
Perhaps there's a prepayment penalty on the loan? It would be part of the original loan documents. I think there are a lot of different ways this "fee" can be calculated depending on the lender and the terms of the original loan.
An amortization schedule will tell your coworker if it's worth paying a fee to pay off the mortgage early in one lump sum.
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ripvanwinkle
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All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
Joined: Jan 9, 2011 22:36:42 GMT -5
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Post by ripvanwinkle on Jun 25, 2020 22:17:34 GMT -5
The payoff balance will always be more than the statement balance. If they are using the statement balance from June 1, they have accrued almost a full month of interest since the last payment. Interest will also be charged up until the payoff is received. There will also likely be certain fees involved in the payoff process, though those should not be much. I never had an escrow account on any of my mortgages, but I would guess that if there was an imbalance in that account it would also affect the payoff amount. Ahh, the escrow. That must be it.
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justme
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Post by justme on Jun 26, 2020 1:18:59 GMT -5
I just refinanced and my old mortgage company also charged interest until I think the 15th of the next month for an end of the month payoff. I signed the docs on the 24th. Part of the reasoning was time - to get the money, send the money, them to get the money, then apply the money. So a totally of 45 days of interest. I was not quite 5 years into my mortgage and it was definitely more than a few bucks. They also charged PMI and maybe escrow for that month - though my escrow did end up getting refunded.
If you request a payoff statement they detail exactly what goes where. Mine was several pages long though most was legalise writing.
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raeoflyte
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Post by raeoflyte on Jun 28, 2020 21:27:49 GMT -5
Most companies will fax you a payoff with a breakdown within a few hours to a couple days so he can see what the difference is.
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haapai
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Post by haapai on Jun 28, 2020 23:37:14 GMT -5
Points? I've really got no clue how they work or are accounted for. They also don't seem very common these days. But if they are tracked separately from the mortgage balance, there might be a couple grand left.
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Deleted
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Post by Deleted on Jun 29, 2020 7:08:47 GMT -5
Points? I've really got no clue how they work or are accounted for. They also don't seem very common these days. But if they are tracked separately from the mortgage balance, there might be a couple grand left. Points you pay up front at closing. It's basically buying down your interest rate.
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