Three of our loans paid off on June 1. The title company's checks covered interest through June 4 and June 5. The operator owed interest through June 1, so we sent him $472.60.
That is the end of the process. Here is the whole thing, start to finish, so you know exactly what a payoff with us looks like before you sell or refinance.
How Interest Runs While the Loan Is Open
Our loans are interest only, and interest is paid behind the month, not ahead of it. At closing you pay the interest for the days left in the month you funded. After that, the payment due on the 1st covers the month that just ended. The October 1 payment pays for September.
We count days the way your note does: every month is 30 days, and the daily figure is your balance times your rate, divided by 360. That daily figure is the number that matters at payoff.
What Is on the Payoff Statement
Ask for one any time, or have your title company request it with your authorization. It is free, and so is every revision if your closing date moves. The statement shows:
- Your principal balance. What you borrowed, less any principal you have already paid down.
- Interest for the current month through a payoff date. Only the days since the last payment covered. Interest you already paid never shows up again.
- A daily amount for each day after that date. So your title company can close on any day inside the statement's window without ordering a new one.
- Anything unpaid. A late fee or an extension fee, if one applies, and where it applies, the county's own charge to record the lien release, passed through at cost. On most payoffs this line is empty.
That is the whole list. There is no payoff statement fee, no exit fee, and no line for interest you did not use.
A Worked Example
Say your October 1 payment went through, which paid September. You sell the house and your closing is set for October 18. The payoff statement shows your principal plus interest for October 1 through October 18: eighteen days at the daily figure.
If the closing slips to the 25th, nothing needs to be reissued. Your title company adds seven more days at the daily figure. If the closing moves past the statement's window, we send a new statement, and it is still free.
Now say that house was on a six-month loan and you are selling in month three. You have paid for three months. There is no prepayment penalty and no minimum interest clause, so the months you did not use cost you nothing.
Interest Stops When the Money Arrives
Title companies usually mail payoff funds, and they do not know exactly what day the check will land. So they often add a few extra days of interest to make sure the payoff is never short. That is reasonable on their end. It just means the check is frequently a little more than you owe.
You owe interest through the day the funds reach us, not the date printed on the statement and not the extra days in the check. After every payoff we compare the two. When the check covered more days than you owed, the difference goes back to you with a short statement showing the math. You do not have to ask for it.
The June example above: the statements were good through May 28, the funds arrived June 1, so four days of interest were owed. The checks covered seven and eight days. The extra days on the three loans came to $472.60, and it went back to the operator.
A Few Things That Keep Payoffs Smooth
- Ask for the statement as soon as you have a closing date. Early is better, and revisions are free, so there is no reason to wait.
- Send funds only to the address on the statement. Our payoff address does not change by email. If anyone emails you new instructions, call us at a number you already have before a dollar moves.
- Watch your maturity date. If a sale or refinance is going to land after maturity, call us before that date, not after. Your note already includes built-in extensions, and we would rather sort out the timing with you ahead of time.
What This Means for You
Selling early never costs you a penalty. Your title company can close on any day inside the statement's window. And the only interest you pay is for the days you actually had the money.
If you have a loan with us and a closing coming up, call 804-208-0465 and we will get your payoff statement out. If you are shopping lenders, ask each one to walk you through a payoff the way this page does. The answer tells you a lot about the rest of the loan.