A Current Payoff Statement, often called a “Payoff Letter”, is an official written statement from the current lender or loan servicer showing exactly how much is needed to fully satisfy the existing mortgage on the property as of a specific date. This document is critical for DSCR Loans for both refinances and certain acquisitions (where the seller’s mortgage will be paid off at closing).
This Payoff Letter will typically include the principal balance outstanding and daily accrued interest, or interest calculated through a specific payoff date. This should also include a per diem interest rate so the title company can adjust the payoff if closing is delayed or moved up, to save time in needing to order a fresh letter. There may also be information on any escrow shortages or advances, late fees or other servicing charges, if applicable. If there are prepayment penalties in effect, details on the amount owed will need to be included. Note that many of these payoff letter documents will include an expiration date, and in these cases, an updated document is required as the title company would no longer be able to calculate the per diem amount.
While this is generally out of borrower control if it’s an acquisition transaction, best prepared borrowers on refinances should proactively communicate their current loan terms and work closely with their current lender to make sure these payoff letters are sent as quickly and smoothly as possible, and are comprehensive in any needed information.
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