Creating a payoff letter is essential to any loan or mortgage repayment process. Our free templates and this guide can help you get started.Provide a clear explanation: Your letter should acknowledge and indicate why something happened. A payoff letter provides instructions on how to pay off a loan with a lump sum before the loan term ends. Learn how payoff letters work. A letter of explanation can clarify your financial situation and get you one step closer to qualifying for a mortgage. This is an example of a payoff letter used in a syndicated loan transaction. This payoff letter (including the defined terms such as Lenders,. If your lender flags a portion of your mortgage application, you might need to draft a letter of explanation to move forward with the homebuying process.