What exactly is Payoff balance for a mortgage?
If you understand that lenders charge interest in arrears, then you will easily get the concept. Notice how when you close on a loan that you skip a payment? Well, you don’t actually skip the payment. Mortgage interest is charged after the fact. So the mortgage payment you make in February is the interest that accrued in January. Therefore, when you order a payoff, you are getting a statement that includes: 1. The principle balance. 2. Accrued interest. 3. Pre-pay penalty, if applicable. 4. Admin fee, if applicable. Hope this solve the riddle for you!
