The benefits of an FHA home loan for many borrowers far outweigh the FHA payoff rule, but it’s more about the principle than the money for many people.
If you have an FHA home loan and pay it off before maturity, at closing, you’re expected to pay for a whole month’s interest, no matter what day of the month you settled. So, even if you close on the first day of the month, you still have to pay interest for the entire month.
As a result, the timing of paying off an FHA mortgage (often as a result of selling a home) has been essential to avoid payment of additional interest. The problem is that buyers typically schedule the closing on a home, making it difficult for sellers to time the closing to avoid excess interest charges.
FHA Committed to End the Full-Month Interest Payoff Policy by January 21, 2015
The FHA has committed to change its full-month interest payoff policy by January 21, 2015, due to a regulatory mandate from the Consumer Financial Protection Bureau.
Learn more in the Los Angeles Times article: Controversial FHA payoff rule to end.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients to lower their monthly mortgage payments.