Your “payoff amount” is always higher than your remaining principal balance. Your balance is the amount of remaining principal owed. Your payoff amount is the balance plus prorated interest from the last payment received until the loan is actually paid off.
The funding date is usually different from the closing date. The government mandates a three-day rescission period for refinances of primary residences. Loan payoffs will not occur until the fourth business day post closing. This will affect the payoff amount, the final payment date and the release of any cash.
Do you actually get to skip a payment? It seems that way because your first regular payment is usually not due until the second month after closing. The reality is that while you do get a break on paying principal for the closing month, between the old and new loans, you are still paying a full month's interest.
Don't count on your existing escrow funds for closing. If you have an escrow account for taxes and/or insurance, these funds will be held there until the current loan is paid off. Accordingly, unless funds for taxes due and/or a new escrow account are covered by the new loan, be prepared to advance this money at closing. It will typically take several weeks before your current escrow account funds are returned to you, so it pays to plan ahead.
As always, we're here to help you with your transaction and to answer your questions. We want you to be comfortable with the process and understand it fully.
A good credit score is important for more reasons than just obtaining new credit. These days, it can factor into everything from landing a new job to getting the best deal on your insurance policies. It's more important than ever to avoid late payments on your mortgage!
A 100 point drop for one late mortgage payment? It’s true. A single 30-day-late mortgage payment can cause your score to drop by as much as a hundred points. Credit scoring algorithms vary based on many factors, and in some instances, the damage may be even greater and last for years.
The costs accumulate. At the time, a single missed payment will cost you only a late fee, but the expense really adds up on your next loan or missed opportunity. Low credit scores typically mean a higher rate and cost. Higher rates can mean hundreds or thousands of dollars of extra expense over the life of a loan.
Missed payments are usually unplanned. Usually, events beyond our control lead to late payments, such as an accident, illness, job loss or family issue. At other times, carelessness or a hectic life may result in a forgotten payment.
What can you do?
Little other than time will decrease the negative impact of a late payment, so prevention is the one sure remedy. If you don't already have a good system in place to assure timely payments and are not sure what's best, reach out anytime. We'll be happy to help set up a plan that's right for you.
Jason,
Please enjoy this quick update on what happened this week in the housing and financial markets.
"There are two things a person should never be angry at; what they can help, and what they cannot."Plato
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