A payoff demand statement provides a precise, up-to-date payoff amount that differs from your regular loan or mortgage statement. While your monthly statement shows the balance as of its closing date, a payoff demand statement accounts for additional interest accrued daily until your planned payoff date, plus any fees or penalties.
Here’s how it works:
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Requesting the Statement: You or your authorized agent (like a settlement agent or attorney) request a payoff demand statement from your lender, specifying your planned payoff date. This can often be done via your lender’s online loan servicing portal or by phone.
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Lender Calculation: The lender calculates your remaining principal, accrued interest up to the specified date, and any fees such as prepayment penalties or statement request charges.
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Issuance of the Statement: The official payoff demand statement is issued, showing the total payoff amount and a “good through” date, the final date the payoff figure is valid.
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Payment Compliance: You must pay the exact amount using the specified method (usually a wire transfer or cashier’s check) by the “good through” date to avoid additional interest and delays.
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Lien Release and Confirmation: After payment, the lender releases any lien on your property or vehicle and sends you paid-in-full documentation. For mortgage loans, this might involve recording a satisfaction of mortgage document with the county recorder’s office to clear the property title.
Common components of a payoff demand statement include:
- Total Payoff Amount: Exact sum to fully satisfy the loan.
- Good Through Date: Deadline to send funds without recalculation.
- Principal Balance: Remaining loan principal.
- Accrued Interest and Per Diem Interest: Interest accumulated since last payment, calculated daily.
- Fees: Any applicable penalties or administrative fees.
- Payment Instructions: Specific details for how to submit payment.
Common mistakes to avoid include using the monthly statement balance instead of the payoff demand amount, missing the good through date, and sending incorrect payment types.
For those selling or refinancing property, the payoff demand statement is typically requested by the settlement agent during the closing process. Details on roles involved in this process can be found in our article on the Settlement Agent Role.
Understanding your payoff demand statement ensures a smooth, accurate loan payoff process and prevents costly delays or errors. For more detail on managing your loan and payment options, see our guides on the Mortgage Loan Cycle and the use of an Online Loan Servicing Portal.
Additional Resources:
- Consumer Finance Protection Bureau (CFPB): Understanding payoff statements
- IRS Tax Topic on liens and loan payoffs
This process is governed in part by federal regulations such as the Real Estate Settlement Procedures Act (RESPA), which mandates timely provision of payoff statements for mortgages. Always confirm with your lender for specific procedures and any fees involved.
By accurately obtaining and using a payoff demand statement, you take an essential step in closing your financial obligations efficiently and transparently.