A payoff letter is usually written by the lender, or legal representative of the lender, after a formal request is made by the borrower. Loan industry experts reveal that payoff letters provide details of the exact amount of money to be paid, when it is to be paid and how to pay it. Lenders may provide the letter free of charge or charge a nominal fee for the service, notes About.com
The payoff letter itself is simple and straightforward. However, the specific financial details of the loan are only accessible to the lender. Loan rates often fluctuate, which is why it is important to have the lender compile the final payment details in writing. The payoff letter reveals to the borrower the exact amount of money required to pay off the loan balance, according to legal advice site Nolo. This information includes the unpaid principle, interest and any related fees.
Payoff letters can be used to prevent a foreclosure sale. In this situation, the homeowner should request the letter at least five days before the desired payoff date. This gives the homeowner time to make the payment and stop foreclosure proceedings, explains Nolo. Although payoff letters may be requested by phone, if a legal record is needed, the request should be made in writing.