One logistical challenge in refinancing a mortgage is getting a certified check for the amount you have to bring to the table at the time you sign the closing papers. Even if you are doing a no-cost refinance, you still have to pay pre-paid interest for the partial month and escrow deposit.
If you are using a good low-cost lender, as you should, you often don’t get the final HUD-1 settlement statement until the night before the closing is scheduled, after banks are closed. Sometimes you don’t get it until the day of signing, leaving you very little time to go to the bank and get the certified check.
It caught me off guard a few years ago. I had to resort to a cash advance from my credit card to make it happen. I sure don’t want to do that again.
One option I overlooked until recently is to send a wire transfer to the settlement agent after signing the papers. For a refinance with a different lender, you have a 3-day rescission period. The loan is not going to fund in 3 days anyway. You can take your sweet time in that 3-day window to get your money to the settlement agent with a wire transfer. After you already signed the papers, you know exactly how much you need.
A wire transfer doesn’t have to cost money. If you have the right account at the right place, you get free wire transfers.
Ask your loan officer for wire instructions. They will give you the settlement agent’s bank routing number, account number, name and address on the account, and a set of references to identify the wire as your wire. The set of references is very important. Because they receive many wires in a day, they won’t be able to tell the money is for your file without those identifiers. I was asked to include these on a wire for a refinance:
- property address
- borrower name
- their file number
- name of the person handling my file
Wire Transfer At Fidelity
I do my wire transfers at Fidelity because they have an office near me. It’s easier to explain what you want to do face-to-face and make sure they understand.
Fidelity can do wire transfers online, but the online form doesn’t have a field for those references. You have to use the paper Non-Retirement Redemption Form. Check off option C under section 4 and put those references under "For Further Credit/Additional Instructions." Don’t worry it’s just one line on the form. Write it all down in the space below and tell the Fidelity rep it’s very important to include all of it. They have 4 lines of 35 characters each in the actual wire software they use.
Wire transfers run through the Federal Reserve. Ask the Fidelity rep to call you with the wire reference number after it’s sent. It’s a long string with letters and numbers. Mine came at 18 characters. The reference number will be useful if someone has to look for the wire.
My wire went smoothly. It arrived on the same day I gave the wire transfer form to the Fidelity office. I would use wire transfer at Fidelity again if a similar need arises in the future.
[Photo credit: Flickr user Tim Evanson]
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I also discovered the three day rule and the ability to use wire transfers during my last refinance. Since the last time I needed a cashier’s check was during my previous refinance, I am thinking there is now no reason to keep $20 in a BOA account for in-person services. Maybe a medallion signature guarantee? There has to be a way to work around that.
Another good reason for a wire transfer: the HUD-1 is wrong.
We’ve done nine refis over the last decade (home and rental property) and every single one of them had a problem with the fees. Sometimes it was the lender’s bad math on the pre-paid interest (“Oopsie!”), other times it was the title company double-charging the recording fees or courier fees. Every time the title company (and occasionally the lender) had to scramble to fix the errors.
Over the last few years we’ve been able to persuade the title companies to make the closing documents available a day or two before closing (even via e-mail) so that we can read through everything. Their alternative is to watch us sit in their conference room for 90 minutes on closing day reading through everything, so they’re usually cooperative.
If the wire transfer can’t be free, then at today’s low interest rates another alternative is to deposit an extra few thousand dollars in escrow. That’s not easily achieved, and there’s always a delay before the escrow refund check finds its way back to you, but it offers a safety margin at closing.
Eli – You can get a medallion signature guarantee at a brokerage firm. Fidelity, Schwab, and TD Ameritrade all have local offices.
What is the max amount you can wire transfer? Isn’t there a limit?
I was going to do a wire transfer when I closed on a re-fi a few months ago, but to my surprise the closing agent said she could accept a personal check since the closing costs were below a certain amount (I think she could accept a check for up to $2,000). I was really surprised, but wrote out a check immediately! So worth asking. This was Bank of America, and they have all my money anyway, so maybe that had something to do with it.
Separately, they did such a terrible job–the re-fi took almost six months due to multiple delays and errors on their part–that after I responded to a customer service survey by detailing their mistakes, they sent me a check out of the blue for $500 with a letter of apology!
The limit on a wire transfer, practically speaking, is the amount of money in your account. A wire transfer can easily handle $100 million.