What few people know about mortgage balances

Do you know how much you owe on your home? If you wanted to payoff the loan today what would be the total due? Many borrowers think that the amount they will owe upon closing is simply the remaining balance showing on the monthly statement. This is incorrect.

Loan interest is paid the first of the next month (ie: December 1st payment will be paying November’s interest). When you first open the loan you receive the first month with no payment. You pay for that interest when the loan is closed.

If you were to refinance or payoff the mortgage on the 15th of December you would owe interest for November, and interest on loan from the 1st - the 15th of December in addition to your original balance, any prepayment penalty, unpaid late fees, unpaid property taxes etc. Any unpaid interest and fees will be collected at this time.

If you are refinancing you will also be required to pay the mid month interest on the new loan (from the 15th - the end of the month). Also, if your taxes and insurance are a part of your monthly payment you will be required to withhold these fees in an escrow account. This can affect your expected cash out if you are not aware of these payoff balances. Do your homework before applying and you will avoid surprises.

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