When should you stop paying your home loan during a house sale? Great question, right?

Selling a home is often exciting, but it also brings questions about how and when your mortgage payments end. When you sell, the mortgage is settled on the closing date, marking the official end of your mortgage obligation.

However, the exact timing and steps can vary based on when your payment is due and how the closing agent handles the payoff.

I will provide the following information so you better understand the mortgage payoff process:

• How the closing date impacts your final mortgage payment.
• The role of escrow agents in coordinating mortgage payoffs.
• What happens if the sale closes after your monthly payment date?

As a Massachusetts Realtor who has represented thousands of home sellers, one of the most frequently asked questions I receive is when I should stop paying my mortgage. It is essential never to miss a mortgage payment, as it can negatively impact your credit score. Of course, you will want to avoid being in that situation.

Let’s explore how mortgage payoff works when selling your home.

When Do I Stop Making Mortgage Payments Selling a House?

1. Mortgage Payoff Occurs on the Closing Date

Your mortgage is paid off on the closing date of the home sale. At closing, your mortgage lender receives the entire remaining loan balance. This transaction eliminates your mortgage debt, allowing the new buyer to assume ownership without liens.

Checking that the mortgage has been paid off should be part of your home-selling checklist. Confirm with your attorney at closing for proof that this step has been completed.

How Does the Closing Date Affect Your Payments?

The closing date directly determines when you stop paying your mortgage. It is set during the home sale negotiation process, about 30 to 60 days after the buyer’s offer is accepted.

Until the closing date, your mortgage remains active, meaning you must continue making monthly payments as scheduled.

Why Is Closing Day Critical?

The payoff transaction on closing day clears your loan balance. This event formally releases you from the mortgage and signifies the property’s official transfer. If you have an existing mortgage, your lender provides the exact amount needed to settle the debt at closing.

2. The Role of the Closing Attorney

The buyer’s lender assigns a closing attorney in Massachusetts. The attorney represents the lender and their best interests.

The closing attorney typically handles the financial side of the home sale, including paying off the mortgage. Their job is to ensure that all financial obligations are met and that the property transfer is smooth and legally sound.

How Do They Calculate the Payoff Amount?

The closing attorney coordinates with your mortgage lender to confirm the payoff amount. This includes any accrued interest, fees, and remaining principal balance as of the closing date. They handle this communication, so you don’t need to worry about calculating or negotiating the amount.

What If the Closing Date Changes?

If the closing date shifts, the closing attorney will recalculate the payoff amount to reflect the new date. This ensures the exact balance is paid when your home sale is finalized.

3. What Happens If the Sale Closes After Your Payment Due Date?

Making a Mortgage Payment Before Closing

Sometimes, the closing date lands after your regular mortgage payment due date. If this happens, you might need to make your regular payment as scheduled. However, any overpayment or extra interest paid will be refunded once the mortgage is settled at closing.

Why Would You Need to Make a Payment?

You must pay on time to avoid late fees or potential damage to your credit score. Keeping your mortgage current also helps prevent complications or delays during home sales. Even if the closing is scheduled for a few days after your payment due date, it’s often best to make the payment.

I always recommend that my clients speak to their real estate attorney when unsure when to make their final mortgage payment.

Expert Advice

Luke Skar, a mortgage expert with Madison Mortgage Guys, offers some excellent advice.
It’s vital to stay diligent about your mortgage payments, even when you’re gearing up to sell your home. Missing that final payment can wreak havoc on your credit score and future financial plans.

I have seen this happen multiple times in my 20+ year career in the business. A home seller was thrilled to close on the sale of their house, but they overlooked their last mortgage payment in the chaos of moving. This small oversight led to a significant drop in their credit score, plummeting by 50-100 points.

Suddenly, what should have been an exciting next chapter became a financial headache, as that lower credit score and late payment made it almost impossible to secure a good mortgage for their new home.

By ensuring all payments are made promptly, you protect your credit score and prepare for a smooth transition to your new home.

Remember, it’s all about keeping your financial house in order until you hand over the keys.

How Is Overpayment Handled?

If you make a payment and close a few days later, any excess amount you paid will be prorated. The mortgage lender will refund the unused portion of your payment after the closing.

This process ensures you don’t pay for any days beyond the closing date, effectively returning any overpayment you made in good faith.

Conclusion

When you sell a home, your mortgage stops on the closing date. The closing attorney coordinates the exact payoff amount with your lender and handles the financial details to ensure the mortgage is fully paid.

If the closing date occurs after your regular payment due date, you may need to pay, but any overpayment will be refunded after closing.

You should now have a much better handle on when to stop paying your mortgage when selling a house.

Please get in touch with me if you plan on selling a home in the Metrowest, Massachusetts area. I would love to interview.