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Mortgage Refinance: Closing Course of Defined


My mortgage refinance has been accredited by the lender. Now it’s time to choose a date for signing the papers. Is any day of the week higher or worse than others? Sure, if you wish to keep away from paying additional curiosity on a big sum of cash.

The federal regulation (15 USC 1635) says when you refinance the loan in your main residence from a unique lender, you might have 3 days to rescind. Which means when you change your thoughts after you signed the paperwork, you’ll be able to nonetheless get out of it inside 3 days. It additionally signifies that the lender received’t fund your loan till the 3-day rescission interval is over.

There is no such thing as a proper of rescission on a purchase order loan, or if you’re refinancing from the identical lender, or if the loan isn’t in your main residence. The three-day clock begins on the day *after* the loan paperwork are signed and all the required disclosures and notices are given. Saturday counts as a day however Sunday and financial institution holidays don’t depend.

Right here’s the same old chain of occasions whenever you shut a mortgage refinance as practiced in my space:

Day 1 : You signal the paperwork and obtain all of the disclosures and notices.

Days 2-4 : Rescission interval. Bear in mind Saturday counts however Sunday and financial institution holidays don’t.

Day 5 : The escrow agent requests funding out of your new lender. The brand new lender wires the cash to the escrow account. You begin paying curiosity in your new loan on at the present time. You might be nonetheless paying curiosity in your previous loan.

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Day 6 : The escrow agent pays off your previous loan by wire switch in case your previous lender accepts payoffs by wire. In the event that they don’t, the escrow agent sends them a test by FedEx. The escrow agent additionally data the brand new mortgage with the county recorder’s workplace. You might be nonetheless paying curiosity in your previous loan till it’s paid off.

Day 7 : If the payoff is distributed by FedEx, the previous lender receives the payoff test. The previous loan is paid off. You cease paying curiosity in your previous loan.

You begin paying curiosity on the brand new loan from the day the loan is funded. You cease paying curiosity on the previous loan on the day it’s paid off. There’s going to be not less than someday of overlap for which you’re paying curiosity on each loans until your escrow agent pays off your previous loan by wire on the identical day your new loan is funded. You need to ensure you reduce that overlap to solely someday or most two days.

Right here’s somewhat calendar for the loan refinancing occasions bearing in mind the 3-day rescission interval however assuming there isn’t a financial institution vacation concerned. Every quantity represents a day on which the loan paperwork are signed. Simply observe the quantity. For instance, when you signal the docs on a Tuesday, the rescission interval ends on Friday; the brand new loan might be funded on the next Monday; and the previous loan might be paid off on the next Tuesday (by wire) or Wednesday (by test).

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Mon Tue Wed Thu Fri Sat Solar
Docs signed 1 2 3 4 5
Rescission interval ends 4 5 1 2 3
New loan funded 2 , 3 4 5 1
Payoff wire despatched OR test FedEx’d 1 2 , 3 4 5
Previous loan paid off (by wire) 1 2 , 3 4 5
Previous loan paid off (by test) 1 2 , 3 4 5

The calendar reveals that Monday is a foul day for closing as a result of your new loan is funded on Friday, and also you begin paying curiosity on it however your previous loan isn’t paid off till the next Monday or Tuesday. You pay curiosity on each the previous loan and the brand new loan over the weekend.

If payoff is finished by a FedEx’d test, signing the docs on Friday can also be pushing it. If all goes effectively, the previous loan is paid off on the following Friday. If there’s a delay by someday, additionally, you will pay curiosity on each loans over a weekend.

Signing the docs on Tuesday or Wednesday is the very best for closing a mortgage refinance as a result of the brand new loan is funded on Monday and you’ve got your complete week to work with. Thursday can also be day however inferior to Tuesday or Wednesday.

If you must signal the docs on a Monday, make certain to particularly ask the escrow agent to not request funding on Friday.

Subsequent week, after I signal the loan paperwork, I’ll clarify what these paperwork actually imply.

[Update on March 4, 2008]: I requested the escrow agent and she or he mentioned they might repay my previous loan utilizing a wire switch. That method it cuts down the curiosity overlap to solely someday. She additionally mentioned that not all lenders settle for payoffs by wire. I revised the calendar accordingly.

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