What does the payoff represent in a home purchase transaction?

The payoff in a home purchase transaction specifically refers to the amount owed on the seller's current mortgage. This figure is critical in the closing process, as it determines how much the seller needs to pay their lender to satisfy the existing loan before transferring ownership of the property to the buyer.

In a home sale, before the property can be sold, the seller must clear any debts tied to it, which typically includes the remaining balance on their mortgage. The exact payoff amount can include additional costs, such as early payoff penalties or fees, depending on the terms of the existing mortgage. Understanding the payoff is essential for accurately calculating the seller's net proceeds from the sale.

The other options do not accurately describe what the payoff represents. The total loan amount signifies what the buyer intends to borrow, the cost of closing involves fees associated with the sale process rather than any loan balances, and the balance left on the down payment pertains to what the buyer still needs to pay towards their initial investment in the home, but does not relate to the seller's mortgage.