Mortgage Refinance: Closing Process Explained

39 Comments on Mortgage Refinance: Closing Process Explained

1. indexfundfan on March 3, 2008
   
    

   tfb,

   Questions for you :

   1. Is FedEx always involved to pay off the old loan? Or is it only for the escrow company you are using? Wouldn’t the escrow agent wire the money to the old lender?

   2. Based on your chart, I couldn’t figure out why Thursday is not a good day to close.

   Thanks.
2. TFB on March 3, 2008
   
    

   I don’t know the answer to the first question. All my refi’s are done at the same escrow company and they always used FedEx. I’m interested in hearing what others’ experience is.

   Thursday is also a good day, just not as good as Tuesday or Wednesday. If you sign the docs on Thursday, you have a 1-day cushion for any delay. Tuesday and Wednesday have a cushion for 2 days. In the order of preference, it is

   Tue/Wed > Thu > Fri >> Mon
3. indexfundfan on March 3, 2008
   
    

   Thanks. I am asking all these questions because my refi will close on a Thursday. Also, this is the first time I am not doing a refi with the same lender.

   I think a wire was used for my last refi, but I could be wrong.
4. TFB on March 4, 2008
   
    

   When I sign my documents, I will ask them about paying off the old loan by wire.

   I hope you got a good rate too!
5. ManInTrouble on May 18, 2009
   
    

   I have just refinanced my loan. The paper was signed on 5/6/09 (Wednesday). According to the final closing statement, I start paying interest to the new lender on 5/11/09 (Monday). The closing date is 5/12/2009 (Tuesday). But when I contacted the old lender, I was told that they received the funding on 5/15/2009 (Friday) and therefore, they charged me interest for 14 days.

   I understand that it’s typical to pay 1 or 2 days of overlap interest during refinance. But 4 days of overlap interest seems unusual (especially when the closing date falls on a Tuesday).

   Questions are:
   1. If the closing date on the statement is 5/12, should I pay the interest for 5/11?
   2. What could have caused the delay between 5/12 and 5/15? Any ideas?
6. TFB on June 6, 2009
   
    

   @ManInTrouble – (1) Yes, because typically the loan is funded the day before the closing date. (2) You should ask your settlement agent how and when they did your payoff. If they sent a wire, your old lender should’ve received it on Tuesday 5/12. If they FedEx’d a check, your old lender should’ve received it on Wednesday 5/13. If your settlement agent didn’t send payoff on time, they should pay you the extra interest. I had this happen to me once. I complained to the settlement agent. They paid me the extra interest because they caused the delay. On the other hand, if your settlement agent did the payoff on time, you should get the wire or FedEx tracking number and complain to your old lender for crediting you too late.
7. ManInTrouble on June 18, 2009
   
    

   I finally got the issue resolved, but it ain’t easy.

   I asked the settlement agent about the overlap interest – no response at all. I escalated the issue to the branch manager. She said she needed some time to investigate. Three weeks later, she still could not provide the details of the closing date to explain the excessive overlap interest. I finally have to talk to the regional manager to get it resolved. No details was given, but they offered me a refund check.

   Once again, I want to thank you for your comments and support. Double thumbs-up for the refinancing event calendar.
   Bravo!
8. Danny on July 2, 2009
   
    

   My situation is this: I closed 6/23, funds were suppose to disburse 6/30 and for some reason they are delaying. What is my recourse?
9. Shirley Siegrist on October 10, 2009
   
    

   What do you think of closing on a refinance by notary? Lender said they will send a notary to the house. Who is responsible to explain the terms and legalities of the forms signed? Somehow it does not seem like the best practice.
10. TFB on October 10, 2009
    
     

    Shirley – If I have a choice, I would prefer to close it in a local settlement agent’s office and face a real settlement agent. A traveling notary can make some explanation but they don’t know all the answers. See my experience in Mortgage Refinance Completed.
11. suzanne lustgarten on October 29, 2009
    
     

    confused on interest due on estimated closing statement

    On my estimated closing statement which was due to close 10/26
    they charged me interest on old loan 10/1 to 11/1 (interest for whole month)
    even though I made october 1 payment on old loan which I know pays interest for september. The interest i am charged on new loan is 10/26 thru 10/31.
    So on old loan shouldn’t i just be charged 10/1 thru 10/26?

    1.On old loan aren’t you just charged interest up until the date the loan funds?

    2. Is it normal procedure on a closing statement to make the borrower pay a full month interest on the old loan for the month the loan closes? Do you get a credit back when they receive funds paying off old loan since you paid interest for the whole month on old loan at closing?
12. Glen Furumizo on November 13, 2009
    
     

    I signed on 11/2, closed and funded to escrow on 11/6 they are now telling me my old loan will be paid off on 11/16. 10+ days of overlap interest. Can they do this?
13. ManInTrouble on November 13, 2009
    
     

    Glen,
    Who are “they”? The title company or the old lender? How did “they” explain to you about the discrepency between the closing date and the paid off date?
14. Glen Furumizo on November 14, 2009
    
     

    The Title co is Escrowpoint, Inc.
    23282 Mill Creek Dr., Ste. 340
    Laguna Hills, CA 92653
    The old loan is BOA.
    When the loan funded on Fri after noon they said 48hrs but tues came then they said Weds was a holiday so thurs. Then thurs came and they said it will be paid off on the following monday 11/16. I explained it was unacceptable and they said it is no fault of their own and they will turn it over to a manager to look into.
15. TFB on November 15, 2009
    
     

    Glen – Sounds like the title company seriously dropped the ball. You shouldn’t have let the new lender fund the new loan on a Friday to begin with. Even that, if you trace the little calendar in the post, your old loan should’ve been paid off on Tuesday Nov. 10 at the latest. Complain to the title company. Don’t take no for an answer. See how ManInTrouble got a refund in comment #7 above.
16. Den on March 11, 2010
    
     

    My refinance was closed on 2/2. The old lender received the fund on 2/2 afternoon. Do I need to pay my old lender interest for 2/2?
17. steve on June 1, 2010
    
     

    if refinancing with the same bank why should there be a need for a wire or check payoff. closing was suppossed to be on the 30th buy didnt happen and now with the holiday weekend am i going to be paying pre paid interest for the whole month of june?
18. Chris on October 27, 2010
    
     

    I have recently closed on a refi loan (10/22) and signed all the new loan docs. Funding was supposed to be (10/25) but when contacted the title company about repaying old loan, they said the lender needs additional documentation. Contacted the lender and said they need additional info before they will fund.

    Can they legal delay funding even after all the final loan documents were signed?
19. Chris on October 27, 2010
    
     

    REVISION:

    Funding was supposed to be 10/27, not 10/25 as previously stated.
20. TFB on October 27, 2010
    
     

    Chris – Yes they can delay funding if they find some documents not to their satisfaction. The law only says they can’t fund until a certain date. It does not require them to fund as soon as that date arrives.
21. cjs755 on December 2, 2010
    
     

    I’m closing on my refinance loan next week. I told my credit union that I want to pay my taxes. My loan amount is $149k, which includes closing costs. But when they sent me my committment letter they increased to $157(taking account escrow). The committment letter said that I can now pay my taxes but my loan amount is still $157k, and they will pay me back the escrow amount included in the $157k. But now I’m paying interest on the $157k and not the $149k. When I can called to see if I can change the loan amount they said I would have to start application process from the beginning. Can they change the loan amout the day of closing?
22. TFB on December 3, 2010
    
     

    cjs755 – If you don’t mind the slightly higher monthly payment, you can just make a one-time principal payment of $8k immediately after closing. Your loan will be paid off sooner than 30 years (or whatever your term is) and you won’t be paying interest on the higher amount. That will be the easiest way to handle this.
23. Paulin on December 17, 2010
    
     

    My refinance will be closing in next couple weeks, since both Fridays are holidays during the time period, will Monday closing be best to avoid paying overlap interste?

    Thanks a lot for your advise!
24. nikki on January 3, 2011
    
     

    what if the old lender comes back after a few weeks and state that you still owe them money. This is even after all documents were signed. Checks cashed. New lender is in place and you have started paying the new lender. What are my options? And what is “po shortage”?
25. TFB on January 4, 2011
    
     

    Yes it’s possible the payoff amount was less than a full payment. PO stands for payoff. You will have to pay them the shortage and get them off your back. How much are you short?
26. Tatyana Sannikova on February 16, 2011
    
     

    My refinance with the same lender will be closing on Feb25, Friday. According to MA law it takes 3 days ( Sat, Mon and Tuesday) till my old loan will be closed. So my new loan will start on Wed, March 2nd. Since I made Feb 1 payment on old loan do you think it would be better to close on March 1st, Tuesday?
27. Confused on October 1, 2011
    
     

    Hi, Thank you for sharing your experience. I am new to the refinance process and just signed my closing document online more than two weeks ago. However, nothing has happened ever since. The new lender (ally) didn’t transfer the fund to the old lender (gmac) and I am still paying my old mortgage. Is this normal? Based on your article, the fund transfer should have happened within a week once the closing document was signed.
    If anyone can provide any information, it will be greatly appreciated. Thank you.
28. TFB on October 2, 2011
    
     

    @Confused – The documents you signed online are probably just disclosures, not the closing documents. You will have to sign the closing documents in person in front of a notary public. Your new lender will notify you when it’s time for that step. Just wait.
29. Dazed on November 17, 2011
    
     

    This is a good article. I have questions in my specific situation. My LO is asking when I would like to close. According to the article, tues/wed is best but if I choose that for next week seeing how the holidays are involved, how is my scenario impacted? Should I just postpone until the following week as I understand that closing the beginning of the month is also very favorable from a prepaid interest perspective.

    One curious item, LO said that my loan would fund on or after 11/29. That being the case wouldn’t it be best that I close ASAP?
30. TFB on November 17, 2011
    
     

    @Dazed – You count the days: leave 3 days after you sign for rescission. Next Tuesday is still the best day (Wed, Fri, Sat for rescission, OK to fund on Monday).
31. Dazed on November 18, 2011
    
     

    Thanks for the reply! I went ahead and scheduled for tues, 11/22 to which my LO promptly replied that closing is scheduled for 11/23, wed??? Anyway, not sure it matters at this point, but isn’t Friday, 11/25 a bank holiday too (i.e., rescission would not count that day either?
32. TFB on November 18, 2011
    
     

    @Dazed – Friday 11/25/2011 isn’t a bank holiday. See holidays observed by Federal Reserve.
33. Dazed on November 18, 2011
    
     

    So closing on my new date (Wed, 11/23) is as if closing on Thursday (without Holiday) correct?
34. TFB on November 18, 2011
    
     

    @Dazed – Yes, that’s correct.
35. WaitingForFunding on November 20, 2011
    
     

    Thank you for a very comprehensive overview. Im in the process of refinancing a loan. Got my clear to close last Tuesday morning, closing papers drawn late Wed and sent to Title co. We signed closing papers on Thursday morning, and were told that a three day rescission period will take into effect before funding happens the following Tuesday. The signed closing papers was overnighted to lender Thursday by the escrow officer. Im assuming that within the three day period, that they will review the papers sent by title co. Apart from reviewing the signed docs, will the lender undertake any other activities such as re-running credit, verifying employment, etc…etc.. before funding and during the rescission period? Or are we safe to say that they will fund the loan provided that they are OK with all the signed papers? I’m particularly concerned about credit report rerun since our DTI is about 4% below the threshold. The last credit they ran on me during the loan process is exactly 61 days from the funding date or 60 days from the rescission date. Not sure if ALL lenders ALWAYS re-run credit before funding…and if this could pose as an issue if my DTI change. For the folks that are reading this and have done a refi – did they re-pull credit for you the day of funding? or during the rescission period?
36. TFB on November 21, 2011
    
     

    @WaitingForFunding – I believe they do a 2nd credit pull and verbal employment verification during those 3 days.
37. Jennifer on December 20, 2011
    
     

    I refinanced my primary home in September. Part of the funds to be disbursed included a tax payment. However, when contacting the tax authority I was told that the check dispersed to the tax authority was returned to the escrow company as the tax was not due and the amount disbursed far exceeded what will be due in April. The escrow company has acknowledged the receipt of the funds back into escrow but have yet to resolve the funds (financed by my loan) that are sitting in escrow. They have sat on these funds since October although I call them every week for a status of these funds to no avail?

    Any suggestions?
38. TFB on December 20, 2011
    
     

    @Jennifer – I had a similar situation happen to me once before. The old lender paid the tax but it wasn’t reflected in the records yet so the new lender had me pay again in the escrow. The tax authority got paid twice but they sat on the extra money for a long time. They said it was their policy to wait 8 or 10 weeks. Eventually they returned the money to the escrow company which promptly returned it to me.

    Is this escrow company unrelated to the lender and they are just doing disbursements? Or is the escrow just part of your regular escrow held by your lender for tax and insurance going forward? What’s their explanation for not returning the money to you? Are they waiting to still pay the tax when it’s due?
39. Nancy on December 29, 2011
    
     

    We decided to try refinancing with an online company and it has turned into a nightmare. Do we have any options at this point? Our current issue is that our loan was not funded until 12/22 but as of this morning neither our mortgage with Bank of America nor our HELOC with PNC have been paid off. I have requested pay off information from our loan officer. Our right to rescind expired on the 17th. Here’s a few of the gory details.

    12/12 1st closing. Errors: 1) Closing costs overstated by over $2300 2) Most of documents dated 12/14 and 3) Loan amount sometime $235K, sometime $237K. Instructed by loan officer to complete closing and that corrected HUD documents would be emailed to us to sign.
    12/14 Since we still had not received corrected HUD documents after multiple emails & phone calls, we emailed that we were planning to rescind our loan at noon on the 15th if we had not received corrected documents.
    12/14 After receiving our email about rescinding the company re-schedule the notary for very late at night Issues: 1) Additional $1500 charge added to HELOC payoff, 2)Documents now dated 12/13 and 3) not all the documents we signed at 12/12 closing were included
    12/15 Corrected HUD emailed with $1500 charge removed. We signed and emailed and faxed back.
    12/22 loan finally funded

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