When closing on a mortgage refinance, a borrower can expect the following steps and considerations:
1. Review of Closing Disclosure:
- The lender will provide a Closing Disclosure at least three days before closing. This document outlines the loan terms, monthly payment, interest rate, and all closing costs. Review it carefully to ensure accuracy.
2. Payment of Closing Costs:
- Closing costs for refinancing typically range from 2% to 5% of the loan amount. These can include:
- Loan origination fees
- Appraisal fees
- Title insurance and search fees
- Recording fees
- Prepaid interest and property taxes
- Homeowners insurance
- These costs can be paid out of pocket or rolled into the loan.
3. Signing Documents:
- At closing, you’ll sign multiple documents, including:
- Closing Disclosure: Confirms that you understand the loan terms.
- Right to Cancel: If refinancing a primary residence, you typically have a 3-day rescission period to cancel the loan.
- Promissory Note: Your commitment to repay the loan.
- Deed of Trust or Mortgage: Secures the loan with the property as collateral.
- Multiple other lender docs.
4. Escrow Account Setup (If Required):
- If the lender requires an escrow account, you’ll prepay property taxes and homeowners insurance at closing. These funds will be managed by the lender for future payments.
5. Paying Off the Existing Loan:
- The new lender pays off your old mortgage, and you’ll begin making payments to the new lender under the new loan terms.
6. Funding and Finalization:
- After the 3-day rescission period (for primary residences), the loan is funded, and the refinance is complete.
7. Possible Refunds:
- If you had an existing escrow account with your old lender, you will receive a refund for any remaining balance.