Why the payoff amount is more than your balance
Mortgage interest is paid in arrears: each payment covers the interest for the month before it. So the moment a payment is made, interest starts building again on what's left, a little every day, until the next payment clears it. Pay the loan off between payments and that interest is still owed. The payoff amount is the balance plus that interest, up to the day the money arrives.
A day's interest, the per diem, is the balance times the yearly rate, divided by 365. The calculator works it out to the cent and multiplies by the days since your last payment was due.
How to use it
- Enter the loan as it was written: the amount you borrowed, the rate and the term, from your closing papers or an early statement.
- Enter the exact date of your first payment. The day matters here: it decides the day each later payment is due, and so how many days of interest you owe. If you only have the month, switch to “Month and year only” and payments are taken to be due on the 1st, the most common due date.
- Add any extra principal you've paid, and any rate changes, as on the balance calculator.
- Choose the day you plan to pay off under “Pay off on”. It starts at today; a closing date for a sale or refinance is the usual choice.
An example
A $320,000 loan at 3.25% for 30 years, with the first payment on January 15, 2021, is $1,392.66 a month. To pay it off on October 20, 2026:
- 70 payments have been made, the last on October 15, and the balance after it is $279,519.02;
- a day's interest on that is $279,519.02 × 3.25% ÷ 365 = $24.89;
- five days have passed since October 15, so $124.45 of interest is owed;
- the payoff amount is $279,643.47.
Paying off on October 14 instead, a day before that payment is due, the balance is still $280,152.93 and 29 days of interest have built up since September 15: $723.55, for a payoff of $280,876.48. That's about the same money as making the October payment and paying off the day after: the interest has to be paid either way.
Why the exact date matters
With the month only, the calculator takes payments to be due on the 1st. For the loan above, whose payments are really due on the 15th, that would count 19 days of interest from October 1 rather than 5 from October 15: $472.91 instead of $124.45, about $350 too much. The bigger the loan and the higher the rate, the more each day is worth: on $388,000 owed at 6.75%, a day's interest is $71.75, more than $2,000 a month.
What a servicer's payoff statement adds
This is an estimate for planning. The figure to actually pay comes from your servicer's payoff statement, which they must send within seven business days of a written request (Regulation Z, § 1026.36(c)(3)). It can differ from the estimate because:
- it's good through a particular date, with the per diem to add for each day after, since wires and mailed checks take time to arrive;
- some servicers count days differently, for example a 360-day year, which makes each day a little dearer;
- it adds any fees due, such as a statement fee, a recording fee to release the lien, or unpaid late charges;
- it reflects any payment that was late, short or applied differently from the schedule.
Money in your escrow account for taxes and insurance isn't part of the payoff: the servicer refunds what's left after the loan is closed, usually within 20 business days. Check too whether the loan has a prepayment penalty; most home loans made since 2014 either don't, or limit it to the first three years.
Common questions
Is the payoff amount the same as my principal balance?
No. The principal balance is what's owed right after a payment. The payoff amount adds the interest since then, plus any fees, so it's almost always higher.
What is per diem interest?
The interest for one day: the balance times the yearly rate, divided by the days in the year (usually 365). It's what each extra day before the payoff arrives adds.
Does paying off right after a payment save interest?
Not really. Paying just after a due date leaves few days of interest to add, but you've just made a payment, so the total cost works out much the same. What saves interest is paying off sooner, not the day of the month.
Where do I find my first payment date?
On your closing disclosure, your first mortgage statement or the servicer's website. If you can't find the day, your monthly statement shows the due date, which is the same day of the month.
Just want the balance?
The mortgage balance calculator leads with what you owe today, what you've paid and your payoff date. To be mortgage-free by a set date instead, the mortgage payoff calculator works out the extra it takes.