I’m considering Mortgage Refinancing but the payoff amount is higher than my balance. Am I being taken advantage of by mortgage companies like Amerisave who want to discourage mortgage refinancing? Here’s the explanation why your mortgage refinancing payoff amount is not the same as what you owe and several tips before you refi to help you avoid paying unnecessary lender fees.
Your Mortgage Refinancing Payoff Amount is Always Higher
Every month when making your payment you see your mortgage balance on your statement. Your statement may also indicated that this balance is not your payoff amount. Once you apply for mortgage refinancing you’ll find the figures on your loan documents don’t jive with what’s on your statement; obviously it’s got to be a mistake right?
One important thing you need to know about your mortgage payments is that the interest is paid in arrears. When you make December’s mortgage payment you’re actually paying November’s interest. When you apply for mortgage refinancing your payoff amount actually includes interest for the current month because you’re only paid up through the end of the previous month.
Suppose you close on December 10th and have not made your December payment, your payoff amount would include 30 days worth of interest for November, and 10 days interest for December. If you have an FHA home loan you’re stuck paying all the interest for December as yours won’t be prorated for the current month, no matter what day you close on mortgage refinancing.
On top of interest for the current month, your title company may tack on an extra 7-10 days worth of interest to make sure the paperwork is processed in time. If this happens to you and everything goes smoothly the added interest will be refunded to you by the old lender once your mortgage is paid off.
Where to Find Your Payoff Amount
The easiest way to find your payoff amount when mortgage refinancing is on the payoff statement. If you try to calculate the payoff amount yourself you’ll find that 99% of the time your figures don’t match the lenders. Your loan processor will give you the official payoff statement. You can get one by calling your lender; however, you may be charged a fee if you request one of around $30. If you close after the date on your payoff statement the additional interest will be included by your title company. (Unless you have an FHA home loan which automatically includes interest through the end of the current month)
You can learn more about mortgage refinancing without paying unnecessary fees by checking out my free Underground Mortgage Videos.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
