Why so much interest?

Why is my payoff higher (what I owe to the bank) than my last months statement balance?

Did you know when you pay May's mortgage payment you are actually paying the interest for April. So when you send in your May payment it pays from April 1 to April 30th. It is one of the few things you buy in life where you are not paying up front.

But don't worry the bank always gets their full amount. When you sell or refinance, the bank gets all of their interest at the end. Let's say you are refinancing your mortgage and you are closing on May 9th. Let's assume you already made the May payment. You still owe 9 more days of interest on the loan. So they will prorate the interest for 9 days. So lets say the balance as of May 1 was $195,000 and your interest rate was 5 .375% (I must of gotten you that rate during the refi boom... it is such a good rate for a 30 year fixed)

So $195,000 X .05375 (interest rate) = $10,481.25 (interest you would pay this year)
S0 take the $10,481.25 divide it by 365 days in a year = $28.71 (interest you pay per day)
Then $28.71 X the 9 days(when you close on May 9) = $258.44
258.44 + (the balance on May 1) $195,000 = $195,258.44 That's what your payoff would be to the bank.

The lender always gets their money. There is no way around it if you are selling your home, or refinancing. They get every penny to the last day.

So remember when you make this months payment it is actually for last months interest.

Any questions go to my website www.russravary.com and email me. Or get my phone number from my website and give me a call. Lots of good mortgage and real estate information there.

I hope that if somebody in your family has cancer may it go in remission.

Russ Ravary