Although most people refinance their home with an eye to saving money, many quickly discover that refinancing itself isn’t cheap. As part of closing costs, many homeowners must pay notary fees, document preparation fees and courier fees as the cost of doing the transaction. A reconveyance fee is one of these costs, charged by title companies to clear a lien from a title. It’s usually directly passed from lenders on to homeowners.
Mortgages and Liens
When you purchase a home using financing such as a mortgage, the lender uses your home as collateral for the loan. If you default and don’t make your payments, your lender takes possession of your property through foreclosure. To ensure you don’t sell the home and abandon the mortgage, leaving the lender without collateral, your mortgage acts as a lien in most states, which doesn’t allow you to sell the property until the debt is cleared.
Reconveyance Fee Definition
Because liens are a legally binding arrangement, title companies usually handle filing liens with the county as part of the title transfer process. As a cost of county clerks’ time and other administrative costs, many counties or other agencies charge a reconveyance fee each time it alters a title by removing or adding lien information by adding a deed of reconveyance -- essentially the formal name for a lien -- to your home’s title. This fee covers the cost of drawing up, filing and duplicating the deed, and is usually rolled into your closing costs.
Although it might seem as if your lender is trying to nickel-and-dime you with a slew of closing costs, drawing up a deed of reconveyance is an essential part of the transaction -- and is usually handled by a third party. Although fees vary around the country, a reconveyance fee is usually about $65, according to Provident Home Loans. If you believe your reconveyance fee is too high, contact your county courthouse to determine its reconveyance fees.
Refinancing Without Reconveyance
Although it might seem like a nuisance fee, reconveyance fees are essential to clear your title. If you fail to get a release of the old lender’s lien, it will transfer to your new title when you refinance or purchase your home. If the old lien transfers to the new title, you’ll eventually have difficulty selling the property, as your title will indicate you’re still in debt from the prior mortgage.
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