Table of Contents

Reduction Certificate: What It Is, How It Works, Uses

By

澳洲幸运5官方开奖结果体彩网:Alice Zhang

Updated August 23, 2024

Reviewed by

Doretha Clemon

Definition

A reduction certificate, or payoff statement, shows the remaining balance and other financial details on a m🧜ortgage loan.

What Is a Reduction Certificate?

A reduction certificate is a document provided by a lender that clearly outlines and breaks down the remaining balance on a mortgage loan. A reduction certificate usually contains the remaining balance on a mortgage loan, the interest due, fees to pay off the loan, and the good-through date for which the payoff amount is valid. A reduction certificate is also known as a 澳洲幸运5官方开奖结果体彩网:payoff statement.

Key Takeaways

A reduction certificate is a document provided by a lender that breaks down the remaining balance on a mortgage loan.
Reduction certificates may also include the original loan amount, the current balance, interest owed, and fees required to pay off the loan.
With mortgage loans, reduction certificates are used to determine the outstanding loan balance to be paid off through a refinance.

How Reduction Certificates Work

A reduction certificate is generally requested when a borrower is attempting to pay off their mortgage debt. The certificate is obtained directly from the 澳洲幸运5官方开奖结果体彩网:loan servicer and often must be requested by a borrower or a third-party agent working on their ♛behalf. The information provided in the payoff statement is assumed to be accurate by all parties in the transaction and will be used to secure an exact remaining balance.

A reduction certificate or🐭 p♓ayoff statement may include the following:

Payoff date the statement is good through
The original loan amount
Current balance due
Interest owed
Fees or expenses required to be paid before the loan can be closed out

Fees can vary from a minimal cost for the processing of the certificate to more costly 澳洲幸运5官方开奖结果体彩网:prepayment penalty fees. The certificate will also include any legal fees that may have been incurred during the life of the loan. Additional costs and fees associated with paying off a loan may not appear on a borrower’s 澳洲幸运5官方开奖结果体彩网:credit report.

The certificate will often list the terms of the loan, including the 澳洲幸运5官方开奖结果体彩网:interest rate and the date that the statement is good through. Many mortgage lenders also provide a 澳洲幸运5官方开奖结果体彩网:per diem interest rate to accurately calculate the outstanding loan balance down to the date.

Tip

Before paying off your mortgage, be sure to review your statements from your lender or mortgage service provider to determine if there are any errors, such as payments that were not posted correctly or at all. Also, contact your lender to check if there is a prepayment penalty or other fees for processing the loan payoff.

Uses for a Reduction Certificate

In the case of mortgages, reduction certificates can be requested to determine the existing balance on a mortgage that will be paid off through a refinance.

The lenderworking with the borrower on 澳洲幸运5官方开奖结果体彩网:refinancing their loan would obtain a copy of the certificate as part of the verification that the borrower has the 澳洲幸运5官方开奖结果体彩网:equity in their home to refinance the property. The new loan amount would need to cover the outstanding balance on the mortgage, or the borrower would need to provide the additional funds at closing.

A borrower may even request the statement on their own if they are looking for the exact amount required to pay off their mortgage. In some instances, such as with an assumable 澳洲幸运5官方开奖结果体彩网꧟:Federal𒁃 Housing Administration (FHA) mortgage, a potential 🅘borrower may be looking for proof of the remaining mortgage terms before they take✅ ownership of the debt.

Auto loans and other high-balance accounts pܫrovide payoff statements upon request 𓆉to make sure that any early payment being made on a debt satisfies it in full.

Warning

Mortgage lending discrimination is illegal. 澳洲幸运5官方开奖结果体彩网:If you think you’澳洲幸运5官方开奖结果体彩网:ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either to the or the .

Where Can I Get a Reduction Certificate?

Lenders should provide a reduction st🌠ate🐼ment upon request. Some lenders may have an option to request a statement on their payment platform.

Will a Reduction Certificate Show All the Fees Due on a Loan?

A reduction statement includes all the remaining payments but may not include all fees. To ensure you have the total payoff amount, ask your lender what's included.

When Do I Need a Reduction Certificate?

A reduction statement is helpful when refinancing a mortgage or when you're ready to pay off your loan.

The Bottom Line

A reduction certificate can provide a snapshot showing how much you owe on a loan. Reduction certificates are also called payoff statements that include the original loan amount, interest owed, and fees due to pay off the loan.

To receive your reduction certificate, contact your lender to provide one or download it from the lender's online payment portal, if applicable.

Article Sources

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