What goes into a payoff amount
Your monthly statement shows your principal balance: what you would owe if interest stopped today. It doesn't. A payoff amount is the principal balance plus everything that has built up since your last payment.
- Principal balance. The figure on your latest statement, after your last payment posted.
- Interest since your last due date. Mortgage interest is charged a month behind, so you always owe some. It grows by the same amount each day until your money arrives.
- Fees, if any. Some servicers list a charge for recording the release of your lien, or for sending the quote by fax or courier.
- Anything past due. A missed payment or an unpaid late charge is added too. The estimator above assumes you're up to date.
Check how your statement handles escrow. Some servicers subtract the escrow balance from the payoff, and others refund it separately after the loan is paid off.
A worked example
Take the loan used throughout this site: $300,000 at 6.5% for 30 years, with a monthly payment of $1,896.20 and the first payment due December 2021. After the November 1, 2026 payment, its 60th, the principal balance is $280,833.26. The owner wants to pay the loan off on November 18.
| Step | Amount |
|---|---|
| Principal balance after the November 1 payment | $280,833.26 |
| Daily interest: $280,833.26 × 6.5% ÷ 365 | $50.01 |
| Interest for November 1 through 18 (18 days) | $900.18 |
| Fees on the payoff statement | Varies |
| Estimated payoff amount | $281,733.44 + fees |
If the servicer counts a 360-day year instead, daily interest is $50.71 and the same 18 days cost $912.78.
This guide counts both the due date and the payoff day. Some servicers count one day fewer, so your quote can differ by a day's interest. That small gap is one reason to send the amount on the servicer's statement rather than your own estimate.
Older FHA loans can cost more. On an FHA loan that closed before January 21, 2015, the servicer may charge interest through your next due date, as long as it tells you so. Having the money arrive just before a due date avoids paying for days you don't use.
Figures use the same method and checks as the site's calculators. The calculation method page explains both.
Why you owe interest the day after a payment
Mortgage interest is paid in arrears, which means after the fact. The payment due November 1 covers October's interest, not November's. So from November 1 on, November's interest is building up, and nothing has paid it yet.
That is why a payoff amount is higher than the balance on your statement, even when you're fully up to date. In the example, waiting until November 30 means 30 days of interest, or $1,500.30. Each day the money arrives later adds another day's interest.
It is also why your first mortgage payment came a month or more after closing. At closing you paid interest from that day to the end of the month, and your first payment covered the month after that.
How to get the official number
An estimate tells you what to expect. The amount to send is the one on your servicer's payoff statement.
- Ask in writing. Use your servicer's website, a letter or the method it lists. After a written request, federal rules give it 7 business days to send the statement.
- Check the "good through" date. The amount holds only through that day. Many statements also list the daily interest to add for each day after it.
- Ask how the money must be sent. Many servicers want a wire transfer or certified funds. A personal check can take days to clear, and interest keeps building while it does.
- Mind the cutoff time. Money that arrives after the servicer's daily cutoff may post the next business day and pick up another day's interest.
- Selling or refinancing? The title or closing company usually orders the payoff statement and sends the money for you.
After the loan is paid off
- Escrow refund. If your escrow balance wasn't subtracted from the payoff, your servicer has 20 days, not counting weekends and federal holidays, to return it. If you're refinancing with the same lender or servicer, your servicer may offer to move it to the new loan's escrow if you agree.
- Lien release. The lender files a release, sometimes called a satisfaction or reconveyance, with your county. How fast depends on your state's law. Keep the paid-in-full letter with your records.
- Taxes and insurance. With no escrow account, you pay property taxes and homeowners insurance yourself. Ask your insurer to take the lender off your policy.
- Automatic payments. Turn off any autopay so no payment goes out after the loan is closed.
Questions people ask
Why is my payoff amount higher than my balance?
It includes interest from your last due date through the payoff day, plus any fees. The balance on your statement includes neither.
Can I just pay the balance shown on my statement?
You would leave the built-up interest unpaid, so the loan would stay open with a small balance. Send the amount on your payoff statement instead.
How long is a payoff quote good for?
Through the "good through" date printed on it. If your money will arrive later, ask your servicer for an updated statement.
Does an extra principal payment lower my payoff amount?
Yes. It lowers your balance, and with it the daily interest. The mortgage payoff calculator shows how much sooner extra payments finish the loan.
Is there a penalty for paying off a mortgage early?
Many mortgages today don't charge one, but check your loan documents or ask your servicer to be sure.
Sources
- Consumer Financial Protection Bureau, Regulation Z § 1026.36(c)(3): payoff statements within 7 business days of a written request.
- Consumer Financial Protection Bureau, Regulation X § 1024.34(b): returning escrow balances within 20 days of payoff, not counting weekends and legal public holidays.
- U.S. Department of Housing and Urban Development, 24 CFR 203.558: interest when an FHA-insured loan is paid off early.