Mortgage Balance vs Payoff : What's the Difference?

Dated: March 2 2023

Views: 230

Calculating equity can be tricky, especially with a shifting market. It usually starts with the presumed fair market value minus the presumed mortgage balance. And, that’s a good start — but there can be what I call “equity eaters” that require more digging.

A commonly overlooked equity eater is what’s known as deferred principal balance

Deferred principal balances primarily arose out of loan modifications during both the 2008 market crash and forbearances during the pandemic, but they can also exist at any time due to an accumulation of delinquent mortgage payments as a result of financial strain. Deferred balances can be tens of thousands of dollars, so equity can be significantly impacted — if not eroded completely. 

Keep in mind: The actual payoff balance is a different figure than the mortgage balance, so these deferments often do not show up on a mortgage statement. That’s why a payoff should be ordered; it will show the exact to-the-penny amount that’s owed.

To accurately figure out equity, you’ll also need a reliable property value as well as a full title report to uncover any liens, judgments, or encumbrances that also impact the net. Should you need any of these, please reach out anytime — most of this information is at my fingertips!

Blog author image

Portland Oregon Divorce Realtor, Laura Rumford CDRE®

Laura Rumford is a Principal Broker and she has also earned the prestigious CDRE™ - Certified Divorce Real Estate Expert - along with a multitude of other designations, setting her apart as a li....

Latest Blog Posts

Mortgage Balance vs Payoff : What's the Difference?

Calculating equity can be tricky, especially with a shifting market. It usually starts with the presumed fair market value minus the presumed mortgage balance. And, that’s a good start —

Read More

Dos and Don’ts of Replacing a LIsting Agent

 On occasion, a listing agent misses the mark in a divorce case and the parties may want to terminate that relationship in pursuit of a better fit.  It happens! But with written

Read More

Real Estate Trends : What to Expect in 2023

Happy New Year! If I were to sum up 2022’s year in real estate in one word, it would be: Drama!2022 started off with smashingly low interest rates, triggering a real estate pricing boom

Read More

Diminished Mental Capacity & Title Fraud

Perhaps you have had a case with a client who had diminished mental capacity when they hired you. Or, you’ve had a client’s mental or cognitive abilities decline during your

Read More