Escrow & Title
A Minnesota seller has an existing mortgage they will pay off at closing. The payoff amount will be provided by the lender to the closing agent. This amount typically includes:
APrincipal balance only
BPrincipal plus accrued interest through the payoff date
CPrincipal, interest, and a prepayment penalty if applicable✓ Correct
DOnly future interest owed
Explanation
A mortgage payoff statement includes the principal balance, accrued interest through the payoff date, and any applicable prepayment penalty. Some older Minnesota mortgages have prepayment penalties, though they are less common in modern loans.
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Key Terms to Know
Short Sale
A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Fiduciary DutyThe highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.
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