Get the Facts on your Refinance
Here are some common refinance questions and concerns that borrowers express during the settlement process.
How long does the refinance process take?
The length of the process will depend on how organized and responsive your are. First you will work with your lender in a process that involves a mortgage application, a loan estimate, lots of disclosures, and a preliminary Closing Disclosure. And depending on your loan terms, it may involve an appraisal of your property and a few requests for supplemental information. It's important to followup on any lender or title office voicemails or emails to keep the process moving forward.
During this process, your title/settlement company will schedule a date/time for your closing. About 3 days before your final settlement, your lender will release the final numbers to the title office which will make any necessary adjustments to the title insurance premium and required endorsements, and remove any miscellaneous fees that don't apply.
The total process takes at least 3 weeks but it could take longer to get your refinance to settlement.
If you’re thinking about refinancing, start to collect and either scan or take clear photos so that you have digital copies of these documents for each borrower to be listed on the loan.
- Recent pay stub
- Prior year's W2
- Driver's license
- Social security card
- Most recent mortgage statement
- Prior year's federal income tax filing
- Homeowner's Insurance declarations page
- Recent two years of tax receipts*
*Every lender will require proof of tax payments and you have two choices. You can provide the proof yourself and save a few dollars or your lender can pay a third-party to obtain a tax certification at your expense.
If you pay your real estate/school taxes from an escrow account, or if you don't have the receipts, you can formally request a copy. Unless you live in Philadelphia county, you'll need to send a letter to your tax collector along with a self-addressed stamped envelop. There may be a small fee so either call or check the county website first. If you take the time to do this now, you'll avoid a $55 tax certification fee later.
NOTE: If your current mortgage is an escrow loan, your lender will automatically order a tax certification. So if you've got receipts, let your lender know to avoid this $55 fee.
How long does a refinance settlement last?
The final settlement meeting for a refinance still involves a lot of signatures but overall, a refi closing is shorter than a purchase. We typically can wrap up a refinance settlement in about 30 minutes as long as you come prepared.
You should continue to make all mortgage payments up until your refinance goes to settlement. Your mortgage payment will be prorated based on the settlement date and any amount in excess will appear as a credit on the settlement sheet. Even if that means sending in a mortgage payment a week before your refinance goes to settlement, it's better to get a credit than getting hit with a late fee.
If the figures on your Loan Estimate are not 100% in line with what's on your Title Insurance Quote, don't panic. Your lender is providing a preliminary estimate without knowing yet who your title insurance provider will ultimately be.
Once your lender hands off your file to your chosen title company, the fine tuning of the numbers will begin. At that time, your title insurance figures will be adjusted to the exact figures that apply to your transaction.
ALT Title waives any miscellaneous title fees and we'll remove them along with any other fees that don't apply during the final stage of calculations.
If you want to double check title fees against your title quote, focus on the Closing Disclosure, not the Lender Estimate. When you receive your Closing Disclosure a few days before final settlement, your title insurance fees should be in line with your title quote, provided that you input accurate details.
When you compare the payoff amount on your mortgage statement vs your settlement sheet, it's normal to see that final number increase. Here's why:
Mortgage interest is always paid in arrears. When you make a payment, you’re paying the principal on the current month and interest on the previous. So when you payoff the loan, you’re catching up on the interest for that final payment. In addition, you'll most likely get hit with some farewell fees. Lenders typically add a mortgage satisfaction fee of about $100 as well as a fee for preparing the payoff statement. If the payoff funds are wired to your lender, they may charge a fee to receive the incoming wire transfer. On the other hand, if payoff funds are sent via an overnight check, you'll be charged another day's interest which will likely exceed the wire fee.
If you're getting cash back with your new loan, and you're refinancing your primary residence, you won't leave settlement with a check in hand. This is due to a federal law which gives the borrower 3 days to rescind the loan. That 3 day period begins the day after settlement; therefore, disbursements will happen on day #4 following settlement, not counting Sundays. Your title company will overnight your check as soon as the rescind period is over. So although you won't receive a check at settlement, you should have access to those funds within a week.
If your annual real estate taxes and homeowner's insurance are included in your mortgage loan, you have an escrow account. Each month, your lender deposits a portion of your mortgage payment into your escrow account in order to pay your insurance premiums and real estate taxes when due. That escrow account is specific to your loan. When you refinance, your escrow account needs to be closed and a new one created.
When you refinance, if your mortgage payments are all current, you’ll be receiving any remaining balance of escrow funds back. You'll most likely receive a check directly from the lender following settlement or, in some cases, they’ll refund it to you via a credit on your mortgage payoff which you would see on your settlement statement.
You will have some time before your first mortgage payment is due. Typically, you won't have a payment due the month following settlement because you've already prepaid the interest. The day of settlement is the only day you pay interest in advance on your mortgage. Your new loan goes into effect on day 4, and you prepay for the balance of the month.
Don't worry, within a week following settlement, you’ll receive a letter from your new lender outlining the due date for your first mortgage payment. They will also include an initial payment stub or two so that you have them. Ultimately you should receive regular mortgage statements in the mail.
After your refinance goes to final settlement, here's what happens after the 3 day rescind period.
- The loan disburses and if you're getting cash back, you'll receive a check.
- The new mortgage is recorded with your municipality’s recorder’s office.
- Your existing mortgage is paid off and any related escrow account is closed.
- You'll receive a letter from the new lender outlining the due date for your first payment.