Closing on your loan refinance (2024)

FAQs

What happens when you close on a refinance? ›

You'll be asked to review and sign several documents, including affidavits and declarations. Be sure to read all documents carefully and understand their purpose as they are legally binding. When everything is signed and completed, you'll leave the office with a new loan, including a new rate and term.

You pay closing costs and fees when you close on a refinance – just like when you signed on your original loan. You might see appraisal fees, attorney fees and title insurance fees all rolled up into closing costs. Generally, you'll pay about 3% – 6% of your refinance loan's value in closing costs.

The cash-out refinance process, from application to fund disbursem*nt, can take anywhere from 30 to 60 days, as noted by Balance Homes. After closing, there is a mandatory 3-day rescission period, which allows you time to reconsider your decision.

Your lender is bound by law to stick to your contract. After closing, your lender cannot go back on the arrangement they have made with you. Your loan can be denied anytime from the point of application to the point of closing.

Refinancing allows you to lengthen your loan term if you're having trouble making your payments. The downsides are that you'll be paying off your mortgage longer and you'll pay more in interest over time. However, a longer loan term can make your monthly payments more affordable and free up extra cash.

If you are refinancing a mortgage, you have until midnight of the third business day after the transaction to rescind (cancel) the mortgage contract. The right of rescission refers to the right of a consumer to cancel certain types of loans.

Cash-out refinance: Existing and qualifying non-VA borrowers can refinance their mortgages and access home equity. Homeowners must wait 210 days from closing on the existing mortgage and have made six consecutive monthly payments. Your lender would likely insist you maintain at least 20% equity after the refinance.

How long does funding take after closing on your refinance? Your lender will not fund your refinance for 3 – 5 business days because of the required grace period. The Truth in Lending Act gives you 3 business days to nullify the refinance.

Does refinancing start your payments over? ›

Because refinancing involves taking out a new loan with new terms, you're essentially starting over from the beginning. However, you don't have to choose a term based on your original loan's term or the remaining repayment period.

With a cash-out refinance, you get a new home loan for more than you currently owe on your house. The difference between that new mortgage amount and the balance on your previous mortgage goes to you at closing in cash, which you can spend on home improvements, debt consolidation or other financial needs.

If your financial situation changes suddenly, for example, a significant loss of income or a large amount of new debt, then your loan could be denied. Issues related to the condition of the property can lead to a loan denial after closing.

It is possible to sell your house immediately after refinancing – unless your new mortgage contract includes an owner-occupancy clause. It is common for owner-occupancy clauses to require you to stay in your house for six to twelve months before selling or renting it out.

Refinances without closing costs are possible but can come with a higher mortgage rate, which can cost more in the long term. Borrowers can also negotiate a reduction in closing costs, including the lender, application, and processing fees.