February 5, 2025
When a mortgage refinance closes late, it can result in additional costs and complications. One key aspect of this is the per diem interest, which represents the daily interest charged on the outstanding balance of your existing mortgage. Since interest accrues daily, any delay in closing will increase the total amount owed until the loan is fully paid off. The per diem rate is typically calculated by dividing the annual interest by 365 days and multiplying it by the loan balance. If the refinance does not close as scheduled, you will owe more in per diem interest, which can slightly increase the final payout amount needed to satisfy the original loan.
Additionally, using an incorrect or outdated balance can lead to further complications during the refinancing process. If you rely on a mortgage information statement rather than an official payout statement from your lender, there’s a risk that the balance may not reflect all accrued interest, fees, or penalties. Mortgage information statements generally provide a snapshot of the current balance but may not account for recent per diem interest, late fees, or other charges. This can result in a shortfall at closing, potentially delaying the process further or requiring additional funds. To avoid these issues, it’s important to request an official payoff statement, which includes a detailed breakdown of what is required to fully close the original mortgage, including per diem interest through the anticipated closing date.
Source: Absolute Mortgage Team