Why Is Your Mortgage Payoff Higher Than Your Loan Balance When You Sell in Salt Lake County?

Why is the payoff on your mortgage higher than the balance on your statement when you sell a home in Salt Lake County? Because the balance on your statement does not include the interest you owe for the days since your last payment, and it may not include small fees for closing out the loan. The payoff is the exact amount needed to clear the loan on a specific date, so it almost always runs a little higher.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She reviews the payoff with sellers early, because a surprise of even a few thousand dollars can change how a seller feels about an offer.

Your net is what matters. Knowing your real payoff before you list is how you know your real net.

Your loan balance, also called the principal balance, is what you still owe on the loan itself. It shows up on your monthly statement.

Your payoff amount is what the lender needs to receive to close the loan completely on a given day. It starts with the principal balance and adds whatever else is owed through that date.

The payoff statement comes with a "good through" date. If closing slips past that date, the title company orders an updated one, because the number keeps changing every day the loan is open.

• Interest since your last payment. Mortgage interest is paid in arrears. The payment you make on the first of the month covers the interest from the month before. So when you sell, you owe interest from your last payment up to the payoff date. Lenders figure this as a daily amount, often called per diem interest.
• Fees to close out the loan. Some lenders charge a small fee for the payoff statement or for recording the release of the lien. Your payoff statement lists them.
• Any late charges or unpaid amounts. If a payment was missed or late, it shows up here.
• A prepayment penalty, if your loan has one. Most home loans today do not, but some older or specialty loans do. Your promissory note says either way.

A home equity loan or line of credit is a separate lien. It has its own payoff, and it gets paid from your proceeds too.

If your lender collects for property taxes and insurance, you have an escrow account with money sitting in it. That money is not usually subtracted from your payoff. After the loan is paid off, the servicer refunds the leftover escrow balance to you. Federal rules generally require that refund within 30 days of payoff.

Property taxes are their own line on your settlement statement. In Utah, property taxes are paid once a year and are due at the end of November. If you close in early November, before the tax bill is paid, the title company may pay the tax from your proceeds and credit the buyer for their share of the year. If you close after it is paid, the buyer usually credits you for the part of the year they will own the home.

This is one reason a fall closing in Salt Lake County can look different on paper than a spring closing, even at the same price.

1. Pull your latest mortgage statement. Note the principal balance, the interest rate and the escrow balance.
2. Call your servicer and ask for a payoff quote. Ask for it good through a date near when you expect to close. Many servicers let you request it online.
3. Check for a second lien. A home equity line, a solar loan secured by the home, or an old judgment all need to be cleared.
4. Ask about a prepayment penalty. One question now saves a surprise later.
5. Freeze any home equity line. Once you are under contract, stop drawing on it so the payoff does not grow.
6. Build a net sheet. Put the payoff next to the sale price, commissions, title costs and prorated taxes. The seller net sheet guide walks through each line.

Once you are under contract, the title company orders the official payoff for you. Your early number is for planning.

Using the statement balance as the payoff. It is close, but it is not the number. On a larger loan, a month of interest is real money.

Forgetting the second lien. A home equity line opened years ago for a kitchen or a car still has to be paid at closing.

Skipping the last mortgage payment because "it is getting paid off anyway." If your closing slips, that missed payment can turn into a late charge and a mark on your credit. Keep paying until the loan is closed.

Counting the escrow refund as cash at closing. It arrives later, by check or deposit, from the servicer.

Waiting until the offer comes in. If you do not know your payoff, you cannot judge whether an offer works for you.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She asks for the payoff at the listing appointment for exactly this reason: so the price conversation is about your net, not a guess.

Here is a typical example, not a specific client. A homeowner in Salt Lake City is selling because of a move for work. The latest statement shows a principal balance, and that is the number they used to estimate their net.

Before listing, they request a payoff quote good through the expected closing date. It comes back higher than the statement balance. The difference is a few weeks of daily interest plus a small release fee. They also find a home equity line with a balance they had forgotten about.

Now the net sheet is accurate. When an offer comes in with a request for a seller credit, they know exactly what they can say yes to and what would cut too deep. A few weeks after closing, the escrow refund arrives from the old servicer, separate from the sale proceeds.

How long is a payoff quote good for?

How long does a mortgage payoff quote last? Each quote lists a "good through" date. After that date, a new one is needed.

Who orders the payoff when I sell?

Who requests the official payoff at closing? The title company orders it and pays the lender from your proceeds.

Should I make my last mortgage payment before closing?

Should you keep paying your mortgage while you are under contract? Yes. Keep paying until the loan is closed. Any extra is refunded.

When do I get my escrow money back?

When does the escrow balance come back after you sell? The servicer refunds it after payoff, generally within 30 days.

What if I owe more than the home will sell for?

What happens if your payoff is higher than the sale price? You would need to bring money to closing or ask the lender to approve a short sale. Talk to an agent and the lender before you list.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She starts every listing conversation with the numbers: your payoff, your costs and what you walk away with. A price only makes sense once you know that.

The selling your home page covers how she prepares, prices and markets a home. For a starting estimate of what your home could sell for, the home valuation page is the first step.

Thinking about selling in Salt Lake County? Contact Charisse and bring your latest mortgage statement. You will leave the call knowing your real net.