What Is the Closing Process for Refinancing a Mortgage?
Refinancing a home usually takes place when there's at least a difference in the interest rate being paid on a loan and the current interest rate. This usually results in a lower monthly mortgage payment. The closing process for a refinance is similar to the initial closing process. For the most current information, check with a loan officer specialist.
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Refinancing Identification
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Refinancing is when an existing mortgage gets paid off and a new mortgage is taken out. Sometimes, refinancing takes place when a primary mortgage and a second mortgage are consolidated into one refinanced mortgage. When it comes to the closing process for a refinanced loan, it's similar to the closing process of the first mortgage, although it can be slightly more streamlined.
Considerations
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Since some mortgages will penalize the buyer for an early payoff, it's important to make sure that the overall cost advantage works out to the buyer's benefit. In addition, if the initial mortgage has been paid off for a long period of time, going through a refinance might not be cost-effective, as all of the money paid in the future will go toward paying off the interest on the refinanced mortgage and not on building up equity.
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Pre-Closing
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Before the buyer goes to the closing, everything should be in writing, including any statements made by the lender. One important aspect of the closing process is that of the rate lock-in. Ideally, there should be a longer rather than shorter period for the rate lock-in in the event that there are problems with the closing. Prior to going to the closing, all documentation should be examined. Waiting until the last minute for item verification is not advisable.
Process
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Before the buyer gets to the refinancing closing, an application for refinance is submitted (along with any appropriate fees, depending upon the lender). Once the refinance is approved, a location is designated for the closing itself. During this process, it's important to stay in touch with the lender so that any unforeseen circumstances or questions can be addressed. The lender tells the buyer what paperwork is necessary to bring to the closing. At the very least, a valid photo I.D. must be brought to the closing.
Costs
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At the closing, there are certain costs that must be paid. The buyer should bring enough money to the closing to make certain that the process goes smoothly. If not enough money is brought, it delays the refinancing closing. The loan officer should be able to give the buyer an approximation as to what the closing costs will be.
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References
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