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FHA – Pay Interest Through End of Month No Matter When Pay Off Is

Many people don’t realize that when borrowers pay off an FHA loan, they must pay interest through the end of the month no matter when the loan pays off. This often catches sellers by surprise when they have an FHA Loan in place.

For example, if an FHA loan pays off on May 5th, the borrower still has to pay a full 30 days of interest for the entire month of May. For a $400,000 loan at 5%, that additional 25 days of interest is almost $1,400. This is interest that never accrued. It is simply a forced prepayment of interest for a debt the borrower no longer owes. And for sellers tight on cash, it is a very unpleasant surprise.

There is pending legislation to put an end to this practice, but until that time JVM will happily cover all of the “extra” FHA interest* for sellers if we get the buyer’s loan for the same transaction.

*”extra” interest is defined as the interest sellers are forced to pay from the date of pay-off through the end of the month.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167