Why is payoff more than balance

That is because your payment at the beginning of, say, July covers the month of June and each day of that month your amount owed accrues interest. We like to think of it as a stairstep scenario. When you make the payment on the first of every month, every day from there on out your balance goes up, as it accrues interest each day.

Because of this, if you charted out the amount you owe on a graph it would look more like a stairstep than a straight, descending line. It escalates up before it drops down again. How does your closing date impact your mortgage payoff? Check out the new closeitapp. Loan payoff includes more than just principal balance Written by Joe Gentile on So how do you determine your payoff amount?

Comments 2 How long should it take to get a payoff amount from a lender? Order Services. Just a Quote, Please ». Employee Spotlight: Traveling cross-country in a Volkswagen Beetle with a friend, camping gear, and a cat: just one of the many adventures of Saritta Veronesi. Your payoff amount is how much you will actually have to pay to satisfy the terms of your mortgage loan and completely pay off your debt. Your payoff amount is different from your current balance.

Your current balance might not reflect how much you actually have to pay to completely satisfy the loan. Your payoff amount also includes the payment of any interest you owe through the day you intend to pay off your loan. Because your lender more than likely allows for electronic payments, it should post quickly.

However, if your payment is late for any reason, such as a postal delay if you mailed it, you may find you owe a few days of residual interest. The lender will bill you for the amount you still owe plus a late fee. To avoid this problem, allow for a few days of payment delay when you set the effective date for your payoff.

If your payment arrives prior to the effective payoff date, the lender will refund the excess interest you paid via a check or account credit. Herb Kirchhoff has more than three decades of hands-on experience as an avid garden hobbyist and home handyman. Since retiring from the news business in , Kirchhoff takes care of a acre rural Michigan lakefront property and applies his experience to his vegetable and flower gardens and home repair and renovation projects.

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