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A payoff letter is a written statement from the lender that shows the exact amount needed to pay off the loan on a stated date. It differs from the statement balance because interest accrues and fees apply. Example: $250,000 balance plus $1,050 interest plus $150 late fee equals $251,200.
By Marc Cormier
Licenses: Maryland #620443 | Virginia #0225175181 | DC #SP98365998 | Berkshire Hathaway HomeServices
27+ years in real estate. 800+ closed transactions.
Certified as a Certified Divorce Real Estate Expert (CDRE) in 2014.
Last updated: October 2, 2026
Your loan balance changes every day. Interest builds up between payments. Fees get added. The balance on your last statement is where the loan stood on one past date. It is not what the lender needs to close the loan today.
A payoff letter fixes that. The lender states one exact dollar figure and the date it is good for. Your title company uses the figure to prepare the closing. Ask your title company how it pays the lender.
If the home has more than one loan, each lender sends its own letter. A second mortgage or a home equity line needs its own payoff figure.
The lender's letter sets its own terms. It shows how long the figure holds and how to send the money. For how long a lender takes to issue a letter, whether it charges a fee, and when the figure expires, ask your lender. This page states no rule on those points.
Next step: ask each lender for a payoff letter before you agree to any split. Put every figure in your net sheet.
Made-up numbers.
| Line | Amount |
|---|---|
| Statement balance | $250,000 |
| Interest owed to the payoff date | plus $1,050 |
| Late fee | plus $150 |
| Payoff on the letter | $251,200 |
Check the math: $250,000 plus $1,050 is $251,050. Plus $150 is $251,200. The payoff is $1,200 higher than the statement balance.
Made-up numbers. Same sale, two payoff figures. Costs are $45,000 commission, $8,000 closing, and $14,000 repairs, which is $67,000.
| Line | Payoff $300,000 | Payoff $301,200 |
|---|---|---|
| Sale price | $750,000 | $750,000 |
| Loan payoff | minus $300,000 | minus $301,200 |
| Costs of sale | minus $67,000 | minus $67,000 |
| Net before tax | $383,000 | $381,800 |
| Each spouse, split evenly | $191,500 | $190,900 |
Check the math: $750,000 minus $300,000 minus $67,000 is $383,000. $750,000 minus $301,200 minus $67,000 is $381,800. Half of each is $191,500 and $190,900. A $1,200 higher payoff lowers each spouse's share by $600. Section 8-205 contains no 50/50 rule, so an even split is only an example.
Send every letter to your title company. Ask your lender, title company, or attorney about anything the letter leaves unclear.
I have seen this mistake before. A spouse builds the whole plan on the statement balance. The payoff letter arrives higher. The net shrinks and the split gets reopened.
This is where people usually get hurt. They agree on a split before they see the payoff.
Your net is the sale price minus the loan payoff and the costs of the sale. Ask your lender and your title company for the exact payoff for your closing date. Second mortgages and home equity lines need their own payoff figures. Then you split what remains as your agreement or the court says.
A net sheet shows what the sale puts in each spouse's pocket after the mortgage, commissions, repairs, and carrying costs. In a made-up example, $750,000 minus $300,000 minus $45,000 equals $405,000. Split evenly, each spouse gets $202,500. Section 8-205 contains no 50/50 rule. I run a net sheet before you list.
Net proceeds are the sale price minus the loan payoff and the closing costs. The split follows what you and your spouse agree in writing or what a court orders. Maryland Family Law section 8-205 contains no 50/50 rule. Ask your title company and your attorney who holds the money and when each spouse receives it.
Montgomery County
The Montgomery County Circuit Court runs a Family Law Self-Help Center. It is a free walk-in clinic staffed by attorneys, in the South Tower, First Floor, Room 1500. It gives general legal information or limited legal advice on divorce, custody, and related matters. You still pay case fees and costs.
Source: https://www.montgomerycountymd.gov/circuit-court/services/family-law-self-help-center
You should have your own. I am a real estate agent. I do not give legal advice, and I do not work for one spouse against the other.
I am not affiliated with any law firm. I do not recommend one attorney over another. Your spouse needs their own attorney, not yours.
If you need to find one, start with these bar association resources:
Links open in a new tab.
| What an attorney handles | What I handle |
|---|---|
| Who gets the house and the money | The value of the house |
| The marital settlement agreement | The net sheet |
| Court orders that affect the sale | Listing, showings, offers, and closing |
| Custody, support, and everything outside real estate | A written record of every showing and decision |
General information only. Not legal, tax, or financial advice. The referral services are independent of me. I do not guarantee any attorney's work or results.
Licenses: Maryland #620443 | Virginia #0225175181 | DC #SP98365998 | Berkshire Hathaway HomeServices
Co-author of "Cracking the Real Estate Code," a best seller in four Amazon categories on release day, September 2013.1
1. PRWeb, September 13, 2013.
Certified as a Certified Divorce Real Estate Expert (CDRE) in 2014.
No statute or agency rule is cited on this page. Ask your lender for the figures that apply to your loan.
General information only. Not legal, tax, or financial advice. Examples use made-up numbers.
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