Borrowers can use a payoff statement to receive information on the total amount of money required to close out a loan. Consumers typically request a statement if they want to pay off their home equity loan, first mortgage or second mortgage due to a cash windfall or a small remaining balance on their home loan. While borrowers can usually request the total owed balance on a home loan for free, a payoff statement provides detailed information on the components of the owed home loan, such as any penalties and interest the borrower will owe for paying off the loan.
According to U.S. Legal, a mortgage payoff statement includes a full list of the original loan amount, the amount the borrower still owes, the current interest rate, any remaining interest payments and the total payments the borrower has made on the original loan balance. The statement also includes a prepayment penalty fee if the mortgage contract contained a clause preventing the homeowner from paying off his mortgage early.
Borrowers can usually request their payoff statement in one of three ways depending upon the lender. They can complete an online request, make a request by phone or submit a written request to the bank that owns their mortgage. Borrowers will have to verify their identity and provide their mortgage account number and personal information. They may also have to provide a reason why they are requesting a payoff statement and inform the lender if they intend to pay off the loan.
Mortgage lenders can charge fees for a written payoff statement that allow the lender to recoup the costs of preparing the statement. The lender will list this fee as part of the total amount the borrower must pay on the payoff statement. Most states allow lenders to charge a reasonable fee to process and send a payoff statement to a borrower, but some states, such as Georgia, allow borrowers to receive a statement for free. First Tennessee charges a $35 fee for a payoff statement as of April 2011. Banks may also provide a verbal payoff quote for free by telephone.
Payoff statements usually take little time to process, and an individual can have a statement faxed or emailed to her within minutes if she completes an online request, depending upon the lender. A mailed statement takes longer to arrive. For example, First Tennessee allows individuals to receive a statement seven to 14 business days after a request. If a borrower intends to use his payoff statement to fully payoff his loan, he should notify the bank of the intended payoff date. After a borrower makes payment, the lender will credit the individual’s account and close out the loan within a month.