can the owner of a land contract deduct uneared interest when paying off balance of loan?

Asked by R G Bender, Arizona Sun Dec 2, 2007

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Ginger R., Home Seller, Massachusetts
Mon Dec 3, 2007
Unearned interest may arise if interest is paid in advance, and not in arrears. Contracts of this type that I have seen, did allow for netting prepaid unearned interest against the principal balance when paying off the loan. But that is contract specific. You will need to check the contract itself , or have your attorney do so, to determine if that can be done in this specific case.
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Gail Hiebert, , KCMO
Sun Dec 2, 2007
Mr. Bender. I believe you mean 'unearned' interest? But what mechanism in the contract, land or otherwise, would a party accumulate unearned interest? So maybe you mean "earned" interest, that is, interest that is part of the contract, but not paid yet? The owner of a land contract when paying a balance, would pay the amount of the original note, plus any interest that has accrued from the last payment date to the date of closing. If you will visit your escrow-title company and bring them your information, they will be able to help and let you know exactly what the pay-off amount would be at closing. Hope this helps.
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