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Short and simple: if a mortgage lender (on a loan that's not allowed to have early payoff fees) imposes a "payoff statement fee" to obtain a statement for paying it off early, is there any reason to request and pay for such a statement as part of paying it off, rather than just making a (potentially very large) additional principal payment of the remaining balance, and letting them figure the remaining balance for the next "normal" statement?

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None, really. You can try to guess how much interest has accumulated since your last statement date and include that in your "final" payment, then wait to see if you over- or underpaid. The purpose of requesting a payoff is to have your lender compute the accumulated interest for you (based on your estimated payment date), with a fee for the convenience, so that you don't have to make a subsequent "final final" payment.

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  • Wouldn't it be not just a "final final" payment, but then a "final final final" payment for further interest missed on the "final final" payment, etc.? That is, something like a geometric series. The amounts would be rapidly decreasing, but it may take several tries to get the error down below 1 cent where the balance shows $0.00.
    – nanoman
    Jul 18 at 23:32
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    Isn't it simple enough to whip up a spreadsheet and calculate it down to the cent? And they could just overpay a bit and get it refunded if they aren't sure. Seems better than paying a fee.
    – Craig W
    Jul 19 at 1:38
  • I was thinking that too Craig. Overpay let them send you some money back Jul 19 at 2:24
  • Typically lenders will calculate the "final" payment based on a specific date (not always the current date) and by including a few extra days of interest for the funds to fully clear.
    – D Stanley
    Jul 19 at 12:42
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    If you are refinancing, rather than simply paying off the mortgage, it's worth the small fee (mine was $5) to settle the old mortgage quickly (since the money from the new mortgage is going directly to your old mortgage). (I never had to "pay" the fee separately , anyway; it was just folded into the principal. $5 on top of ~$200,000 wasn't worth spending any energy on.)
    – chepner
    Jul 19 at 13:11
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I have done that just recently (submitted a ‘nearly payoff’ extra payment), and it worked perfectly fine. I intentionally paid about 500$ low, and let them make a final deduction at the end of the month.

If you don’t want to wait till end of month, overpay by a 100 $ or so to be on the sure side. They’ll mail you a check back for the difference.

If you request a payoff statement, one disadvantage is that it will include the full interest for the validity period (often several weeks), and you won’t get that back - you basically pay them an extra some weeks interest.

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  • Doesn't that depend on which payoff date you request? It doesn't have to be the end of the next payment cycle.
    – chepner
    Jul 19 at 15:52
  • Your last sentence is hard to believe. Just requesting a payoff for a later date means you owe that much even if you pay earlier?
    – TTT
    Jul 19 at 17:00
  • They provide you a ‘payoff quote’, which happens to include interest up to the end of the validity period, but they don’t point that out of course. You pay that amount, and the loan is closed. Try it…
    – Aganju
    Jul 19 at 18:57
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    On previous refis I recall getting a small interest refund after payoff along with my escrow. I assumed it was due to what date it actually got paid, but I'll have to confirm. I suppose it could be bank dependent. But if some banks really do keep it as you suggest, then that could work out to be a much bigger expense than the fee for generating the statement in the first place. Double whammy there and your proposal is great. You could easily save hundreds of dollars in that final month.
    – TTT
    Jul 20 at 15:12

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