Obtaining a mortgage refinance approval requires coordination of several different companies, all with the goal of providing you with a new loan for hundreds of thousands of dollars. It’s a process that usually takes at least 7 to 10 business days and can take months depending on how busy the companies are and how complicated the new mortgage is. The title company and the new mortgage company still have a lot of work to complete once the refinance is closed and your first payment comes due.
First Three Days After Closing
Federal law requires that you receive a three-day right of recession when you close an owner occupied refinance mortgage. This right of recession is a cooling off period where you can still change your mind about the loan. If you close your loan on a Monday, your three days are Tuesday, Wednesday and Thursday. Your loan becomes official and the funds are sent on Friday. During those three days, the title company sends the paperwork back to the lender, which verifies everything was obtained and signed. If everything is included, the money from the loan is wired to the title company the day after the recession period expires.
Distribution of Funds
The day the recession expires, the title company receives the funds and distributes the money according to the lender's instructions. Your old mortgage is paid off and closed. The mortgage broker is paid its fees, as are all the companies that provided other services for your loan. Any funds due to you are available for you to pick up, or will be mailed to you if you prefer.
Recording the Mortgage Note
The mortgage note is the document that outlines how much money you borrowed and the payment terms. The title company records this document with the county in which the home is located. This creates a public record of your loan amount and lender. Your previous mortgage company files a release of lien with the county once they receive the payoff of their mortgage. This way, the title only shows your current mortgage and not loans already paid off.
Mortgage Company Preparations
The new mortgage company must prepare their servicing department to receive your mortgage payments and ensure the money is credited correctly. If you escrowed your taxes and homeowners insurance, a separate account is created that saves these funds so the lender pays your tax and hazard insurance bills in a timely manner. It may take a week or two for all of your information to show up in the servicing department, so they may not have your loan information available to help you for a few weeks.
David Rouse, currently residing in Raleigh, N.C., has been writing and teaching home owners about the mortgage industry since 1997. Rouse has written training manuals for mortgage professionals and conducted informational first-time home-buyer seminars, providing make-sense answers for a long and confusing process. He studied at Western Kentucky University.