Mortgage Payoff Before Selling: What You Need to Know
Your mortgage payoff amount is the single largest deduction from your sale price. Understanding exactly what you owe, including per-diem interest, prepayment penalties, and other charges, is essential for calculating your net proceeds accurately.
Payoff Amount vs. Current Balance
Your payoff amount is not the same as your current balance. The payoff includes accrued interest through the closing date, any fees, and potentially a prepayment penalty. It is typically $200-$2,000 more than your statement balance.
Payoff vs Balance
+$200-$2,000
more than your statement balance due to accrued interest and fees
How to Get Your Payoff Amount
Contact your lender and request a formal payoff quote. This is a legally binding document that specifies the exact amount needed to satisfy the loan on a specific date. Most lenders provide payoff quotes that are valid for 10-30 days.
Prepayment Penalties
Some mortgages (particularly those originated before 2014) include prepayment penalties. These typically apply if you pay off the loan within the first 3-5 years and can range from 2-5% of the remaining balance. Check your loan documents carefully.
Second Mortgages and HELOCs
If you have a second mortgage or HELOC, that balance must also be paid at closing. Make sure to include all liens in your net proceeds calculation.
The Bottom Line
Request a formal payoff quote from every lender with a lien on your property before listing. This ensures your net proceeds calculation is accurate and there are no surprises at closing.