Payoff statement
A payoff statement is the lender's written answer to a specific question: what does it take to end this loan, on this date.
It is not the balance on the statement, and treating it as such is one of the more expensive mistakes in real estate.
What it adds to the principal#
Interest accrued since the last payment posted, to the payoff date.
Fees — recording, statement preparation, wire charges, and whatever else the note permits.
Advances the servicer has made for property taxes or insurance, plus any escrow deficiency.
A prepayment penalty, where the note carries one.
Each is small individually. Together they routinely add up to a figure noticeably above the balance a borrower has been watching.
Good through, and per diem#
Two fields on the statement do the real work.
The good-through date is the last day the quoted figure is correct.
The per diem is what each additional day adds. It exists precisely so the amount can be recalculated when funds arrive late, which they often do.
A payoff quoted through the fifteenth, satisfied by a wire that lands on the nineteenth, is short by four days of per diem. The lender does not round in the borrower's favour.
Short payoffs#
A payoff that arrives short does not partially satisfy the loan. The loan remains open, interest keeps accruing, and the lien is not released. Servicers commonly return the funds or hold them in suspense while the shortfall is sorted out.
On an ordinary refinance that is an annoyance. On a sale it delays a closing. On a redemption governed by a statutory deadline it can mean the deadline passes, and there is no mechanism to reopen it.
Where it matters most#
Anywhere a deadline is fixed by something other than the parties' convenience.
Redeeming after a foreclosure sale is the sharpest case: the amount required grows daily at the rate stated on the sheriff's certificate, and the redemption period ends on a date nobody can extend. Getting a written figure with a per diem, and building in a margin for the funds to actually arrive, is the whole job.
The same discipline applies to a balloon maturity, a contract for deed cancellation, and any closing with a hard date on the other side.
Ask early#
Payoff statements take time to produce — days rather than minutes at many servicers, and longer where a sheriff's office is computing a redemption figure.
Requesting one at the point the decision is made, rather than at the point the money is ready, is the difference between a calculated payment and a rushed one.