A reader asks: “Should I make my next mortgage payment
before my house closes? We are under contract and scheduled to close on the
14th of the month. “
This is a fairly common question for title companies. And
the answer depends on your closing date and time.
Before closing, the title company will order a ‘payoff’ from
your current mortgage company. After confirming and calculating what you owe on
your current mortgage, we deduct that amount from your proceeds at closing and
send that payoff amount to your lender.
For most folks their mortgage payments are due on the first
of the month. And they are considered late on the 15th of the month. That kind
of makes your situation a little more complicated.
In a perfect world, you and the buyer would sign papers in
the morning, the buyer’s lender would promptly review and approve all
documents, and send funds to the title company. Then the title company would
quickly disburse funds and pay off your mortgage before the mortgage
company’s afternoon wiring deadline. But
in real life, it doesn’t always work that smoothly. One or both of the parties
could be signing in the afternoon, funding approval could take a couple of
hours, etc.
For that reason, many title companies schedule the payoff
amount based on the day after closing. If your closing is delayed or the payoff
is not received before your late date (likely the 15th), you could incur a late
fee. But let’s presume everything is on time and the title company has the
payoff amount correct.
“My advice would be if you have not made your payment for
the month and you are closing on the 14th then your payoff with title already
includes the interest due for November. So it is ok to not make the payment
even up till the end of the month as long as the loan funds in November and the
payoff is wired to the lender,” says Michael Fooshee, Senior Loan Officer at
Verity Mortgage.
He warns that you could be charged a late fee if the payoff
comes in under the amount due or after the due date. “But your credit should
not be affected unless the full payoff or payment wasn’t received by the lender
by the last day of the month,” Fooshee adds. “If you are faint of heart, then I
would recommend to go ahead and pay the monthly payment.”
“Any over payment made will be reimbursed to you,” says
Fooshee. “Also, if you have a positive escrow balance, then you will receive a
refund typically 2 to 3 weeks after the loan is paid off.”
Ultimately, you must pay for every day that you own your
property and will not pay for the days that you no longer own it. If you
overpay, you’ll get money back. If you don’t make that last mortgage payment,
you should be okay – as long as everything goes as planned.
The opinions expressed are of the individual author for
informational purposes only and not for the purpose of providing legal advice.
Contact an attorney, accountant or mortgage officer to obtain advice for any
particular issue or problem. [where: 75230]
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