In the Henry–Susan transaction, what is the payoff amount on Susan's existing mortgage?

In the Henry–Susan transaction, what is the payoff amount on Susan's existing mortgage?

• A. $829.10
• B. $844.50
• C. $900.00
• D. $837.32

Answer: (D)

The payoff amount is the total needed to fully satisfy Susan’s existing loan as of the payoff date. It isn’t just the current loan balance or the next monthly payment; it includes everything the lender requires to release the lien on that date—outstanding principal, accrued interest through the payoff date, and any applicable payoffs or fees (such as a prepayment charge or other administrative items). It may also reflect any escrow balance adjustments, since the title company will credit or debit any unearned escrow amounts as part of the payoff. In this Henry–Susan scenario, the lender’s payoff figure on the payoff date comes out to 837.32, so that is the amount that must be paid to satisfy the loan at closing. The other numbers would represent either just the principal, only one month’s interest, or amounts not including accrued interest to the payoff date, so they don’t reflect the total required by the lender.

The payoff amount is the total needed to fully satisfy Susan’s existing loan as of the payoff date. It isn’t just the current loan balance or the next monthly payment; it includes everything the lender requires to release the lien on that date—outstanding principal, accrued interest through the payoff date, and any applicable payoffs or fees (such as a prepayment charge or other administrative items). It may also reflect any escrow balance adjustments, since the title company will credit or debit any unearned escrow amounts as part of the payoff.

In this Henry–Susan scenario, the lender’s payoff figure on the payoff date comes out to 837.32, so that is the amount that must be paid to satisfy the loan at closing. The other numbers would represent either just the principal, only one month’s interest, or amounts not including accrued interest to the payoff date, so they don’t reflect the total required by the lender.