In the closing settlement described, the payoff on Susan's existing mortgage results in a debit to Susan of how much?

In the closing settlement described, the payoff on Susan's existing mortgage results in a debit to Susan of how much?

• A. 3,300
• B. 5,000
• C. 1,250
• D. 2,100

Answer: (A)

When a property is sold, any existing loan on the property must be paid off to clear the title. The lender’s payoff figure is the amount required to fully satisfy that loan as of the closing date, and this payoff is shown as a debit against the seller on the settlement statement because the seller is responsible for paying it out of the sale proceeds. That debit reflects the principal balance plus any accrued interest or penalties needed to obtain a lien release. In this scenario, the mortgage payoff amount is 3,300, so the amount debited to Susan for the mortgage payoff is 3,300. The buyer’s funds and other closing items determine the seller’s net proceeds, but the payoff itself specifically creates that debit equal to the payoff amount.

When a property is sold, any existing loan on the property must be paid off to clear the title. The lender’s payoff figure is the amount required to fully satisfy that loan as of the closing date, and this payoff is shown as a debit against the seller on the settlement statement because the seller is responsible for paying it out of the sale proceeds. That debit reflects the principal balance plus any accrued interest or penalties needed to obtain a lien release.

In this scenario, the mortgage payoff amount is 3,300, so the amount debited to Susan for the mortgage payoff is 3,300. The buyer’s funds and other closing items determine the seller’s net proceeds, but the payoff itself specifically creates that debit equal to the payoff amount.