One of the main costs related to the sale of a home is the mortgage pay off. Before closing, you will sign a release for the Title Company or Attorney to obtain the exact amount owed as of the closing date. This allows the Closing Company to prepare the necessary documents, and at closing they will issue a check from your proceeds to pay off the outstanding mortgage.
If you have lines of credit or equity lines, the process is similar to the mortgage pay off. You must authorize the closing company to gather this information. Any amounts owed will be paid off at closing, and any open lines of credit will be closed.
Another potential cost is a prepayment penalty. Many sellers assume that the only amount owed is what appears on their last mortgage statement. This is not always the case. Some mortgages include a prepayment penalty, and you may also owe additional interest depending on the day of the month that you close.
Unpaid taxes or liens are also important considerations. This is why title work is conducted before closing, to ensure there are no outstanding obligations attached to the property. If any exist, they must be paid at closing. The closing company will deduct these amounts from your proceeds and make the payments on your behalf.
Finally, there may be special assessments, such as charges for water, sewer, road, or other local government improvements tied to the property. In many cases, these assessments must be paid off in full. In some instances, they may be assumed by the buyer. If they are to be paid off, the closing company will once again handle these payments directly from your proceeds.
