My mortgage refinance has been approved by the lender. Now it’s time to pick a date for signing the papers. Is any day of the week better or worse than others? Yes, if you want to avoid paying extra interest on a large sum of money.
The federal law (15 USC 1635) says if you refinance the loan on your primary residence from a different lender, you have 3 days to rescind. That means if you change your mind after you signed the documents, you can still get out of it within 3 days. It also means that the lender won’t fund your loan until the 3-day rescission period is over.
There is no right of rescission on a purchase loan, or if you are refinancing from the same lender, or if the loan is not for your primary residence. The 3-day clock starts on the day *after* the loan documents are signed and all the necessary disclosures and notices are given. Saturday counts as a day but Sunday and bank holidays don’t count.
Here’s the usual chain of events when you close a mortgage refinance as practiced in my area:
Day 1 : You sign the documents and receive all the disclosures and notices.
Days 2-4 : Rescission period. Remember Saturday counts but Sunday and bank holidays don’t.
Day 5 : The escrow agent requests funding from your new lender. The new lender wires the money to the escrow account. You start paying interest on your new loan on this day. You are still paying interest on your old loan.
Day 6 : The escrow agent pays off your old loan by wire transfer if your old lender accepts payoffs by wire. If they don’t, the escrow agent sends them a check by FedEx. The escrow agent also records the new mortgage with the county recorder’s office. You are still paying interest on your old loan until it’s paid off.
Day 7 : If the payoff is sent by FedEx, the old lender receives the payoff check. The old loan is paid off. You stop paying interest on your old loan.
You start paying interest on the new loan from the day the loan is funded. You stop paying interest on the old loan on the day it’s paid off. There’s going to be at least one day of overlap for which you are paying interest on both loans unless your escrow agent pays off your old loan by wire on the same day your new loan is funded. You want to make sure you minimize that overlap to only one day or maximum two days.
Here’s a little calendar for the loan refinancing events taking into consideration the 3-day rescission period but assuming there is no bank holiday involved. Each number represents a day on which the loan documents are signed. Just follow the number. For example, if you sign the docs on a Tuesday, the rescission period ends on Friday; the new loan will be funded on the following Monday; and the old loan will be paid off on the following Tuesday (by wire) or Wednesday (by check).
| Mon | Tue | Wed | Thu | Fri | Sat | Sun | |
| Docs signed | 1 | 2 | 3 | 4 | 5 | ||
| Rescission period ends | 4 | 5 | 1 | 2 | 3 | ||
| New loan funded | 2 , 3 | 4 | 5 | 1 | |||
| Payoff wire sent OR check FedEx’d | 1 | 2 , 3 | 4 | 5 | |||
| Old loan paid off (by wire) | 1 | 2 , 3 | 4 | 5 | |||
| Old loan paid off (by check) | 1 | 2 , 3 | 4 | 5 |
The calendar shows that Monday is a bad day for closing because your new loan is funded on Friday, and you start paying interest on it but your old loan isn’t paid off until the following Monday or Tuesday. You pay interest on both the old loan and the new loan over the weekend.
If payoff is done by a FedEx’d check, signing the docs on Friday is also pushing it. If all goes well, the old loan is paid off on the next Friday. If there’s a delay by one day, you will also pay interest on both loans over a weekend.
Signing the docs on Tuesday or Wednesday is the best for closing a mortgage refinance because the new loan is funded on Monday and you have the entire week to work with. Thursday is also a good day but not as good as Tuesday or Wednesday.
If you have to sign the docs on a Monday, make sure to specifically ask the escrow agent not to request funding on Friday.
Next week, after I sign the loan documents, I will explain what those documents really mean.
[Update on March 4, 2008]: I asked the escrow agent and she said they would pay off my old loan using a wire transfer. That way it cuts down the interest overlap to only one day. She also said that not all lenders accept payoffs by wire. I revised the calendar accordingly.
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Bill says
… i’ve read that many people recommend closing near the end of the month to minimze your pre-paid interest costs for a refinance, but if your current payment (last months interest + next months principal) is more interest than principal, it would seem that closing earlier in the month would make more sense. Am I looking at thinks backwards somehow?
Harry says
Bill – Although closing near the end of the month will lower the prepaid interest paid at the time of closing, it only means a higher payoff amount paid out of the new loan. One way or the other you will have to pay one month worth of interest, with a couple of days of overlap. Since when you refinance, you are usually refinancing to a lower rate, the sooner you start paying the lower rate the better. There’s no reason to delay it to near the end of the month or if you already at the end of the month, to delay it to the beginning of the next month.
Clyde Roe says
Is there any reason why we should not sign the refi mortgage papers on a Saturday in the state of CA?
Harry says
Clyde – The order of preference is Tue/Wed > Thu > Fri >> Mon. Saturday would be between Friday and Monday. It’s the second worst, only a little better than signing on Monday.
Boshyd says
In the situation where we pick Tuesday, why does the new loan get funded on Monday instead of Saturday? Banks don’t issue funds on Saturday is it?
Harry says
Correct. Even though some bank branches open on Saturdays, Saturday is not a business day for banks. Transactions done at a branch on a Saturday get Monday’s date.
Rachael says
Not sure you can even help me with this but….
My sister recently refinanced ($250,000) but the 1st mortgage ($250,000) never got paid off. The mortgage broker and Title company are nowhere to be found. How can this even happen? Is she responsible for $500,000 now? If the deed from the 1st lender was never sent to the new lender is she still held accountable?
indexfundfan says
In all my refinance experiences, the date of signing does not really matter. I try to sign as early as possible or at a date/time convenient to me, and then I would request the title company to fund the loan on a specific date.
So even if you sign on a Monday, just tell the title company that you want funding to take place only on the following Monday. From my experience, they are happy to comply (do check that it is not beyond the rate lock date).
coolwater says
I am closing next Friday. I have not seen any closing document yet. Do I get to review the closing document a couple days before? Also, my lender located in different state. How do we sign papers? I need your help. Thanks!
JR says
I have an offer for a lender I already have loan with. I’m refinancing and the rate is 4.175 for 20 years with no prepayment penalty and will be closing within 20 days according to them. I had another application with a local bank that is quoting me 3.89 on the same loan for 20 years.
The local bank is pretty conservative and taking a bit longer to process the loan.
the question is the following:
since there is no prepayment penalty on either loan. Can I allow the closing on the 4.175 and say, after a few weeks, which is when I think the local bank will answer back, if it goes thru with them, close with the local bank and inform them of the other bank transaction?
Both pulled my credit, local bank first, 4.175 bank second. I did inform the 4.175 bank that I checked with my local bank and urged to offer me the best rate they can.
Thanks for your response in advance. Hopefully i’m not confusing anyone.
I essentially don’t want to loose the refinancing on the 4.175, but want to also take advantage of the local 3.89 rate if that one goes thru. Again, they are very conservative, so the second loan is questionable.
Mike says
Refi’s are not cheap. Also, everyone you refi, they pull full credit report and it will show loans in progress. Too many enquiries are always treated with suspicion by all. So it could affect your credit rating.
Additionally, refi’s are very difficult and long to go thru theSe days. They also have clauses which restrict refi with 6 months sometimes. So check on the same.
Best is to refi with the lowest rate lender. You can always get the rates locked with the bank that offered better rates. This will reduce both your cost and headaches. There are items such as appraisal that you will need to pay by yourself … each lender need appraisal done specifically for them. They will not use any other appraisal. Thus you will waste both money and time.
Good luck.
Joe says
I have a refinance with cashout when will I receive cash out proceeds
Harry Sit says
You get it from the settlement agent at the same time when the old loan is paid off
Amber says
Question: I just found this and had no idea it even mattered when you sign docs. We signed loan docs with a notary 2/2/15. Loan was set to close on Friday. However, I had continued to check online to see that our previous loan had been paid off. After seeing that on Monday 2/9/15 our loan still had not paid off to our previous lender I emailed our closing coordinator and she told me that the payoff statement had expired on 2/9/15 and they were requesting another one. She then emailed me the next day stating that our lender has a waiting period for pay off statements of 5-7 days because they are “backed up” right now. I am not sure how all of this works and if our new loan was funded or not? Are we paying interest on both since the new loan was technically supposed to fund on 2/6/15? Thanks so much for the advice!
Harry Sit says
Ask your closing coordinator whether the new loan was funded. Only they know. If it was already funded, you pay interest on both loans until the old loan is paid off.
Larry Cohen says
Harry: thank you for your sage advice! Quick question: my refi was supposedly “funded” this past friday… I assume that means the money from my new lender was wired to escrow. Per your timeline, I assume funds will be send to my old lender or Monday along with escrow paying my back property taxes that were required to be paid, and other funds required to be disbursed via escrow. Would the net loan proceeds be also sent to me on Monday?? Last question: when would the new deed be recorded at the County Registrar Recorder? thank you in advance for your reply.
Harry Sit says
If you read the timeline you see outgoing payments and recording are done on the next business day after funding. If you want to make sure it happens, call your escrow agent. You are already paying double interest over the weekend.
Daniel says
I have a question regarding a refi with cash out:
04/06 Signed documents
04/09 End of wait period
04/16 Sent email to Broker asking when loan would fund
04/17 Response – next week
04/23 Sent email to Broker asking why loan had not been funded
04/24 Response -We have a funding line limit. Due to the high volume of loans closing at the same time, we are waiting for room on the funding line to open up.
I feel like I’m getting the run around from the Broker and the bank will not give me any information on who I can discuss the problem with. Help!
Any guidance on how to proced will truly be appreciated.
Thanks,
Dan
Cathy says
We were approved for a cash out refi of our VA loan on 3/31/2015 by an online broker. We were told we could skip 2 mtg payments, specifically May and June. By the first week of May, we still didn’t have a closing date, even though we provided everything they said they needed within hours of their requests. In fact, they had everything they needed to process our loan within the first week of April. By the first week of May we were concerned that we would be charged a late fee and that a late mtg payment would hit our credit, so we asked the broker if we should pay it or not. Our processor didn’t bother to answer but our account manager said, “hold off” because it wouldn’t be reported as long as the old loan was paid off in May. Later, our processor said, “You can pay it if you want to avoid the late fee, but your loan will close in May so they won’t have anything to report.” We reasoned that a $65 late fee was cheaper than paying the whole mtg and since we now felt confident that we wouldn’t be 30 days late, we didn’t pay it. After nearly two months of hell, we were finally given a “closing date” and a mobile notary was scheduled during the week of the 18th of May. During that same week, my husband and I used some of our tax refund and paid off two debts to avoid accrued interest ( one of those 12 month same as cash deals). I rushed home from work for the signing and was greeted by my husband who was on the phone with the broker. Apparently, there was one last stipulation that had not been approved by underwriting. They waited until the scheduled closing day to tell us that the underwriter wasn’t “comfortable” signing off on some additional income which we had initially been told wasn’t even needed. This extra income now needed to be included in order to make our LTV work but they were telling us this on the day we were supposed to close! No one mentioned an alternative to the additional income (LIKE REDUCING THE DEBT) which we had done already. The underwriter escalated the decision to his supervisor and this was the height of the hell this broker put us thru, because now, we were facing the holiday weekend. We waited patiently for the holiday to roll by and expected prompt action the following Tuesday. Nothing. They finally got an approval from underwriting and scheduled a second closing appointment for Wednesday, 5/27. By this time, it was clear to us that we would not close in May. They told us we needed to make the May mtg payment PRIOR TO the closing appointment that evening. So we did…paid a fee to make a same day payment over the phone, so now we have been assessed a late payment fee and a transaction fee, plus we had to make a payment we were told we wouldn’t need to make. We signed the paperwork on 5/27 and received an email today (6/4) that our loan has funded. When I asked when we could expect to see the proceeds in our account, we were told Monday (6/8) afternoon. What a nightmare!!!! Is this typical for a cash out refi???? Are we – or will we be paying interest on two mortgages????
Harry Sit says
Not typical but as a rule, always pay your existing mortgage as usual before it’s paid off. Any excess will come back to you anyway. Log in to your old mortgage account and verify it’s paid off. Between the date the new loan is funded and the date the old loan is paid off, you always pay interest on two loans. The question is only for how long.
Cathy says
Thank you! Yes, lesson learned. We wondered why they would tell us not to pay it, but instead blindly followed their advice, believing they knew better. We should have trusted our instincts. Thanks again.
Janne says
We closed and we are close to taxes and insurance being due so those were rolled into our refi. My current escrow has money in it. Do you know, typically, how long after closing and funding it takes to get money from old escrow? I was told it would not roll into the new since money for taxes and insurance was part of the refi.
Thank you.
Harry Sit says
Within 30 days.
Mark says
We have an FHA being refinanced to conventional. For several reasons, not caused by us, but all appraisal errors, title and bank related delays we probably will not close until Friday 9.25 or Monday 9.28.15. You calendar is tell me that funding and payout will not happen until after 10.1.15. As our FHA was closed in May 2011 I am not pleased to think that we will owe an additional full month of interest. I would like to be wrong. Your opinion and is there anything I can do? Thank you for your help.
Harry Sit says
Push for an earlier closing date. Tell all parties you are running against an end-of-month payoff and if it’s delayed to 10/1 you will ask them to reimburse you the 1-month interest. Tell them otherwise you will rescind if closing is delayed to 9/25 or 9/28.
Mark says
Thank you. I have more to loose if I they call my bluff on rescinding as I locked into a lower interest rate than currently available. I will however request reimbursement from the appraiser for the delay. We had an issue because he relied on MLS information instead of calling the tax office to verify the obvious error in the MLS information. Thanks again for this information.
Ann says
I found this site to be very informative and a wealth of information from the different scenarios shared by others on their refinance experiences. I, too, have experienced a delay in the closing process. However, I did close on a Wednesday and from reading your advice this was one of the better days to do so. It is good to know there is someone we can go to for answers on the convoluted process of refinancing. I wish that I had done this research beforehand. I now consider myself well informed thanks to your knowledgeable responses. I will recommend this site to others who might be considering a refinance. Thank you.
Ann☺
Cindy says
I did a refinance with a cash out option. The mortgage company are paying off all of our creditors. On the 28th, that was suppose to be the day that all of the bills were suppose to be paid off. Than we did get the extra cash wired to our bank the next day and our original mortgage was paid off. Today is the 1st and so far, none of the bills have been paid off (or posted). How long does it take to see a zero on all my creditors?
ccutiepb979 says
Feeling misled
I was approached by an institution with an offer to refinance my mortgage at a lower interest rate. It sounded good. I was speaking to the agent on the phone during the entire process. Then she later informed me of the day I needed to visit the branch to meet with the lawyers. When I got there it was then that I understood that we were actually closing the deal. I must admit that she walked me through the agreement as best as she could after which I asked her if we had to sign on that day. I told her I would prefer it be done at the end of the month. She explained that if I did the interest would be higher. She also asked me about my property tax which was due in July. I told her it was not paid as yet. She told me I needed to take care of that right away. I again asked if the entire process could not wait until the end of the month. I felt there was an unexplained urgency. Shed insisted it had to be done that day. To date I have not paid the property tax I would be doing so at the end of the month. From what I am told the mortgage is not registered. I was also told that the payoff has already been done. I feel like rethinking the deal. Is it too late since I have already signed.?
prop says
She’s quick unlike others. Whats the company name? Id like to use them as it beats others who sit on the loan and not close it.
ccutiepb979 says
oh by the way that day was a Friday. The Monday after that was a bank holiday.
Pam says
Is it legal for a mortgage company to fund a loan a day later than they told you it would fund?
Harry Sit says
Yes it’s legal. You are not charged interest until it funds.
Confused says
what happens if we signed all documents and during the 3 day window my last mortgage payment shows up rejected by the bank?
Will we just get billed for PO shortage, or will the new lender stop the closing process?
Harry Sit says
Ask the bank that rejected your payment?
Joe says
Mortgage guy says ok to be past 15 day due date as long as it’s not 30…won’t be reported to credit bureau. Mortgage is then paid off and new payment isn’t for a month … Essentially a free month….is this wise or should I just pay the mortgage the same month I close my refi.
Harry Sit says
Just pay as usual. That way you avoid any problems in case your refi hits a snag. Whatever you don’t pay is added to your new loan. It’s not going to be free.
Ron says
Hello, what a great string of information! I have a question relating to a refi we did and took cash out as well as debt paid off.
we closed on Wednesday 11/23 and the company said the funding would happen the 29th I still show our debt (credit cards/loans) NOT paid off? how long does that usually take?
Thank you
Harry Sit says
As the table shows, the payoff happens one or two business days after the loan funding, depending on whether the payoff is done by wire or by a FedEx’d check. The creditor may still take another day to update its online system showing that the payoff happened on the previous day.
michael says
I have a couple questions about a refinance we just did, we started by working with two lenders both with the same rate, just one with a much higher lender credit, the lender with the higher credit seem to be dragging their feet so we signed with the other lender, on the last day of the 3 day right to change our mind, the second lender called and said everything was ready, we sent the notice to the first lender that day, they paid off the loan the day after the 3 day wait, the second lender wants us to sign closing DOCs today and with notary of Fri, first lender $3000 credit Already signed second lender $13000 credit, I called the former lender and they said they do not return payoffs, the first lender is asking us to stay, we are so confused
Charles Mcghee says
At the beginning of the refi process I was told there wouldn’t be any closing cost. Afterward told loan approved by Loan depot. I was told there was now a $3,577 closing cost. Didn’t have all funds available was told a relative could gift me the cost, relative agreed. I’m now told relative must send account number along with account balance. With the hacking world we live in relative fund have been deposited in my bank but relative doesn’t want to give account number to loan depot is this a valid reason to dis-approve?
GinaRenee says
I see this is an old post but I’m desperately searching for answers to a recent refi. We refi’d our house to help pay for taxes we owed for 2017. We paid $3k to IRS and had a remaining balance of $13xxx left to pay. We indicated to refi company that we needed to close and be funded by 4/17/18 so we could pay off our taxes, well one thing led to another and it didn’t work out. We didn’t close till a month later at which point they indicated they had to withhold our FULL tax amount owed to IRS (not taking out the $3k we already paid because IRS hadn’t processed payments yet). We DONT have a lien against our property for the taxes owed, and had they provided this amount in the refi I would be paying off the dang taxes owed already. Anyways.. now they are willing to pay the $13xxx amount owed for sure and still withhold the $3k so I don’t continue to accrue penalties and interest and will pay whatever is left once final tax payoff rec’d from IRS. My question is.. is this normal? I can’t find anything saying this is a normal practice for a refi. I surely can’t be the only one who this has happened to. Also, when I requested how they’d provide proof of paying the $13xxx they don’t have an answer for me, so how can they even pay my taxes for me… what if this goes just randomly into IRS space and IRS says the funds were never rec’d? Who’s liable at that point? Hopefully someone can help me or guide me with some kind of info.
RichardB says
I refinanced my house to pay off some CreditCard debt. The disclosure doc shows that a check made out to a CreditCard company is made out for more than I owe. Will that CreditCard company send me a check for the difference? Or give my credit on future charges?
I rather get a check for the difference.
Harry Sit says
After the payment is posted, call the credit card company and request a refund of the credit balance.
Michelle Meals says
We did a refi. On our home on Feb. 6 and the lender and the title company we went through said our right to rescission was until Mon. Feb.11 because it 3 business days and the funds were released tuesday. When we went to give a voided check for the title company to wire our money to us the check amount was different and she said he said (as in our lender said) he gave us a revised copy of the closing disclosure and he did not so she gave us one but we have our signed documents and now the numbers dont match he changed them. Are they allowed to change any numbers after the signing and what do or can we do?
Catherine says
Our mortgage refi is now in the 3 day right to cancel. If we want to make a change on the payout, can we do that without starting all over; with an addendum or such?
Sharyn B says
I took out a refi that ended with a 4 day overlap! I signed on 1/15/20 (Wed) and the loan funded on Tuesday 1/21/20 (Monday was MLK holiday). At signing, the mobile notary said the payoff funds would be wired out on Thursday, 1/23/20. I was not happy but I am in Hawaii (moved here last year) and thought maybe it was due to the time difference, as the prior lender’s servicer is in Illinois.
The payoff was not wired out until Friday. I asked them why they missed the deadline and received all sorts of excuses. First, it was because of a scanning error in the loan package that resulted in covering up the amount of the payoff. They are up against a 10 am wire deadline. The next day, when I spoke to another agent, she claimed there was nothing wrong with the paperwork but they only had 2 hours and 15 files to process and mine did not make it in time for the wire cutoff. Fortunately, the prior lender did process the payoff on Friday and closed out the loan. Because the wire was a day late, the amount was short (obviously). I did have an escrow for taxes and insurance so they satisfied the payoff that way. I am not sure that was kosher, but it was preferable to having a shortage existing over the weekend, with additional interest being paid.
The title company refused to take responsibility for the late payment and said the previous lender was to blame.
Any suggestions?
Shaun Brown says
I recently refinance my home mortage. I received my closing statement and recevieve a small refund. The old loan was paid off.
I reached out to my broker to receive the new payment information on the loan (which bank to pay) and they told me that the loan is not finanalized and that I should pay them (the broker) the 1st month payment until the loan is finalized. Is this normal?
Thank you,
Harry Sit says
That’s not normal. Your closing paperwork should show which bank is funding your new loan. It may also include the loan number and a payment coupon for your first payment. If not, you can contact the bank and ask for that information.
Newbie says
I’m in the process of refinancing my mortgage to a lower rate/monthly payment and set to closed on April 23rd. Appraisal and all documents are submitted per request after conditionally approved on new loan. I am going through with my initial lender. I just paid this month mortgage to the bank and my homeowner insurance premium will expired this month which I told them to cancelled it after the expired date (this month) and went with a lower premium policy which they stated they will coordinate with my lender. I guess, is there anything I should look out for and etc? Very new to this so I want to make sure I am on the right track. Thanks in advance.