Escrow & Title
A Massachusetts property seller's attorney is preparing the HUD-1 equivalent (Closing Disclosure). The seller's side shows a 'debit' for the mortgage payoff. This means:
AThe mortgage is being transferred to the buyer
BThe seller owes this amount and it will be deducted from the seller's proceeds to pay off the mortgage at closing✓ Correct
CThe buyer is assuming the seller's mortgage
DThe mortgage is being paid by the closing attorney from escrow
Explanation
A debit on the seller's side of the closing statement is money the seller owes or is responsible for. The mortgage payoff is a debit because the seller's mortgage must be paid off from the sale proceeds at closing.
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Key Terms to Know
Escrow
A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
Transfer TaxA tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.
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