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burningbush2007 · Joined: 06 Feb 2008 Posts: 1 1.38 Dollars($)

I recently refinanced and paid off my existing mortgage, to another lender. My prior balance was $93,891.00, with a 2% payoff penalty. The payoff check total was $97,300.00. I was charged $1,877.82 for the penalty; $28.00 release fee, and $2,368.31 for interest. The payoff was made on the 30th day of the month, prior to its due date.
Should I have been charged this interest fee?

sara

Hi burningbush,

Welcome to the forums.

What I feel is, the lender is charging a penalty since you've paid off the loan prior to the end of the repayment period. So, the lender is likely to lose some interest for the remaining period and that's the reason he has charged the prepayment penalty.

Take Care

jerry · Posted: Thu Feb 07, 2008 5:16 am Post subject: RE:

Hi Burningbush,

Usually the prepayment penalty comprises of a certain percentage of the unpaid loan balance at the time when you prepay the loan or about 6 months of interest payment. But in your case, the lender has separated the costs of penalty and the interest. What you can do is, add up the costs and see if the total amount is higher than 6 months of interest that you would have paid had you not paid off the loan.

You can even talk to your lender directly and let him clarify it.

Thanks,

Jerry

ckalvesmaki · Posted: Thu Feb 07, 2008 5:17 am Post subject:

The interest on a mortgage is paid in arrears......so the interest charge was actually for TWO months of interest and probably padded a little by the title company......so they didn't under pay....you would then get a refund of the excess in a couple of weeks.

evolovik26 · Posted: Thu Feb 07, 2008 7:46 am Post subject:

Thanks Cedric
as far as above posters go if you dont know the answer please dont answer the question.
Cedric is right your mortgage is paid in the rears meaning you pay for jan on the first of february and the payoff is actually up to date $$ owed to payoof the loan. This meand on a 30th of the month you would owe for mon previous and the current mon up to date, that is why its so much.

gmakerley · Posted: Thu Feb 07, 2008 10:02 am Post subject:

kudos to cedric and to eugene for being right on. yes, indeed, in virtually every case, mortgage interest is paid in arrears; and, as cedric pointed out, the payoff was probably "padded" (though not significantly) so as to account for any delays in getting the funds to your lender. also, any overpayment would be coming back to you from the lender.

eugene...if people who didnt know answers were to stop posting, we would have far fewer postings on here. i cant understand why you feel the need to cut out the misinformation - look how much less entertaining this would all be!

Shocked

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Should I be charged interest on a mortgage payoff?