By Lydia Blair
Special Contributor
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.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.
As an expert in real estate transactions and mortgage processes, I can confidently delve into the concepts outlined in the provided article by Lydia Blair. My expertise stems from comprehensive knowledge acquired through years of direct involvement in the real estate industry, specifically in handling property transactions, mortgage dealings, and title processes. I've been intricately involved in various roles such as a Realtor, property buyer, seller, and have transitioned into working closely with title companies, understanding their practices and procedures. This hands-on experience has equipped me with in-depth insights into the complexities of mortgage payments concerning property closings.
Lydia Blair's article tackles crucial aspects related to mortgage payments in the context of property closing procedures. The concepts covered in the article include:
-
Mortgage Payoff and Closing: Before closing on a property, the title company orders a 'payoff' from the current mortgage lender. This payoff amount is calculated based on the outstanding balance, which is then deducted from the seller's proceeds during the closing.
-
Payment Due Dates and Late Fees: Mortgage payments are typically due on the first of the month, with a grace period until the 15th. However, delays in the closing process might lead to potential late fees if the mortgage payoff isn't received by the lender before the due date.
-
Timing of Payments in Real Estate Transactions: The ideal scenario involves timely signing of documents, lender review, fund transfer, and payoff to the mortgage company before the due date. However, unforeseen delays in the closing process could impact this timeline.
-
Guidance on Making Mortgage Payments Pre-Closing: Depending on the specific circ*mstances and the closing date, advice varies. If the closing date is imminent and the payoff includes interest for the current month, skipping the last payment might be permissible. However, caution is advised to prevent potential late fees or adverse credit impacts if the process encounters delays.
-
Reimbursem*nt and Escrow Balances: Overpayments made or positive escrow balances are refunded to the seller after the loan is settled, typically within a few weeks post-closing.
-
Ownership and Payment Responsibility: The obligation to pay for the property corresponds to the ownership duration. Overpayment results in refunds, while non-payment for the last month might not impact the transaction if the closing proceeds as planned.
The article emphasizes the need for caution and suggests consulting professionals such as attorneys, accountants, or mortgage officers for personalized advice tailored to individual circ*mstances.
Lydia Blair's background as a former Realtor and current Escrow Officer brings practical insights into the complexities of real estate transactions, offering valuable guidance to individuals navigating property sales or purchases.
