In the same example, the payoff on Susan's existing mortgage is recorded as a debit to which party?

In the same example, the payoff on Susan's existing mortgage is recorded as a debit to which party?

• A. Henry
• B. Susan
• C. The title company
• D. The lender

Answer: (A)

When a seller’s existing loan is paid off at closing, the funds to satisfy that loan come from the buyer’s bring-to-close funds, so the payoff is treated as a cost to the buyer. On the settlement statement, that payoff amount is shown as a debit to the buyer and a corresponding credit to the lender who receives the payoff. The seller isn’t charged for paying off her own loan at this point; she’s transferring title and receiving proceeds, while the title company only facilitates disbursements. So, the payoff on Susan’s existing mortgage is recorded as a debit to the buyer, Henry.

When a seller’s existing loan is paid off at closing, the funds to satisfy that loan come from the buyer’s bring-to-close funds, so the payoff is treated as a cost to the buyer. On the settlement statement, that payoff amount is shown as a debit to the buyer and a corresponding credit to the lender who receives the payoff. The seller isn’t charged for paying off her own loan at this point; she’s transferring title and receiving proceeds, while the title company only facilitates disbursements. So, the payoff on Susan’s existing mortgage is recorded as a debit to the buyer, Henry.