What is the Payoff Amount?
The payoff amount of a loan refers to the amount of money, including any prepayment penalty, that it will take to pay a loan off in full. When you pay off a loan early, you need to request the payoff amount from the lender, because the payoff amount may change on a daily basis, depending on how the interest is compounded. For instance, a student loan may give you a 10-day payoff amount, which gives you 10 days to pay the amount before it continues to gain interest. Generally speaking, though, when a home is sold, during closing, the buyer's lender will call the seller's lender and ask for the payoff amount so the money can be sent and the lien can be removed from the title. When the lien is removed from the title, it can be transferred to the new owner, and the new owner's lender can place a lien for their amount until it is either paid off or sold.