-- Answers to Questions About Real Estate Law
Money and real estate news you can use everyday

Real Estate Lawyer
Question of the Week
Tip of the Week
Recommended Books
Contact Sam

Paying Off My Mortgage


Ask the Real Estate Lawyer: Real Estate Law Q&A

By Ilyce R. Glink and Samuel J. Tamkin

Summary: "I'm paying off my mortgage" writes a reader. Ilyce R. Glink and Samuel J. Tamkin respond with some financial advice on things to consider when paying off a mortgage.

Q. I’m going into the fourth year of a 30-year mortgage. I’m seventy-seven years old and living on a fixed income.
(article continues below useful links)

I have enough cash to pay off the mortgage, and then I wouldn’t have to spend $600 for each monthly payment. I’m thinking that I’m better off having the additional cash flow than paying off a mortgage when I’m 103.

When is the best time of the month to pay off this mortgage and do I need an attorney to close this deal? My loan has no prepayment penalty.

A: In general, you have to keep a couple of things in mind when paying off your loan. Interest is almost always paid in arrears on a mortgage. In other words, your loan payment on the fist day of July is for the interest owed for the month of June.

Frequently, homeowners receive a monthly statement from their lender indicating what they owe on their loan, and how much interest they’re paying. They think that if they pay the balance due, they will pay off the loan.

But the payoff is usually more than what is indicated on the statement. Why? The lender’s monthly statement does not typically include interest owed from the last payment date.

You shouldn’t need an attorney to payoff your loan. But you will need to order a “demand letter” or a “payoff letter” from your lender.

The demand letter or payoff letter will indicate the exact amount owed on your loan through a specific date. If the date furnished in the letter has already passed, almost all letters will include a “per diem,” or per day, amount owed on the loan to pay it off.

Most lenders will require that the payoff be made using a cashier’s check or wire transfer of funds. Make sure you are careful in following the procedures to payoff your loan. You should send the payment to the lender by a reliable overnight service. That way, you’ll make sure it gets there and have a way to track your payment.

Other than an FHA (Federal Housing Administration) loan or a home with private mortgage insurance (PMI), you can pay off your loan at any time.

In general, FHA loans are paid off on the first day of a month. If you pay off an FHA loan at any other time, you will pay for a whole month’s worth of interest even if your payoff is early in the month. If your loan has PMI, you will pay on a month to month basis for the PMI charge. Therefore, it is best to payoff your loan at the end of the month or, at the latest, the first day of the following month.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is The REAL U Guide to Bank Accounts and Credit Cards. This column is distributed by Real Estate Matters Syndicate. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher. If you have questions for Sam and Ilyce, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website




RSS Feeds

RSS 0.91 Feed
RSS 1.0 Feed
RSS 2.0 Feed

Home Buying   Using Attorneys to Buy a Home - Earnest Money - Quitclaim Deeds - Easements - Seller Misreprensation - New Construction - Buying with Partners - Home Inspections - Seller Problems - Agent Issues
Home Selling    Using Attorneys to Sell a Home - Seller Disclosure laws - Title Problems - Buyer Problems - Real Estate Agent Issues - Tax Considerations
Home Ownership   Neighbor Problems - Seller Misrepresentation And Fraud Issues - Problems In a Condominium Development - Problems Around The House - New Construction Issues - Subdividing Land
Home Renovation   Architect Issues - Contractor Issues - Problems With Contractors - Inspection Issues - Certificate Of Occupancy - Municipal Inspections - Punch List Issues - Financing Issues - Installment Contracts
Real Estate  
Loan Application Problems - Refinancing Issues - Paying Off An Old Loan - Credit Problems - Seller Recommended Lender - Prepaying A Loan - Prepayment Penalties - Predatory Lenders
1031 Exchanges - Financing Investment Properties - Landlord and Tenant Issues - Partnership and Company Considerations - Tax Considerations - Subdividing Land
Contact Us | Sitemap | Terms of Use | Copyright ©2001-2005. ThinkGlink Inc. All rights reserved.
Reproduction of material from any pages without written permission is strictly prohibited.
Site design by Walker Sands Communications