How To Close on a Mortgage Refinance

Refinancing your mortgage involves replacing your current home loan with a new mortgage. Whether it’s with your current lender or a new one, you’ll need to apply, be approved for, and be ready to close on that new loan. While refinancing is similar to getting a loan to buy a home, understanding how to close on a mortgage refinance can help the process go smoothly.

Preparing To Close on a Mortgage Refinance

Closing is the culmination of the refinancing process and is the step where you sign all the documents that finalize your new loan. The mortgage refinance process steps you’ll need to take before you can close include:

• Review your current loan terms and your finances. You’ll want to know how much home equity you have and how mortgage refinancing will save you money.
• Decide on a loan type and choose a lender. Shop around to find the best terms on your loan, whether it’s a rate-and-term refinance or a cash-out refinance.
• Apply for the loan. In addition to an application, expect your lender to ask you for a long list of financial documents needed for refinancing.
• Review the loan estimate. Three business days after receiving your application, the lender will provide a loan estimate that details all the expected costs and terms of the loan you applied for.
• Have the home appraised. Your lender will order a mortgage refinance appraisal to know your home’s current market value, especially if you choose a cash-out refinance.
• Conduct a new title search. Lenders typically require a new title search to ensure your home is free of unexpected liens.

What To Bring to Your Mortgage Refinance Closing

Closing on your mortgage refinance will be scheduled in advance. You will need to bring to closing:

• Government-issued photo identification. You need to prove you are the borrower listed on the mortgage documents.
• The closing disclosure. This five-page form your lender will give you at least three business days before closing lists the final details of your loan, including your new mortgage principal, interest rate, monthly payment, and closing costs.
• Cashier’s check or wire transfer details. You’ll need this to pay your closing costs. According to Freddie Mac, the average closing costs for refinancing are about $5,000 but can vary depending on the size of the loan and the state where you live.

Documents You Sign at Closing on a Mortgage Refinance

On closing day, you’ll sign all the documents necessary to fund your new loan and pay off your old one. Documents you typically need to sign at closing on a mortgage refinance include:

• Promissory note. This legal document formalizes your promise to repay the loan according to its terms. The promissory note also lists the details of your loan, how to make payments, and what happens if you fail to make on-time payments.
• Deed of trust. Your rights and responsibilities are explained in this document. It also authorizes the lender to take back the property if you fail to repay your loan.
• Affidavits and declarations. These documents confirm that all of the information you’ve provided is true and accurate.

Who Attends Closing on a Mortgage Refinance?

Here’s who you can expect to attend the signing of documents on closing day:

• Closing agent. A representative from the lender who facilitates the closing.
• Notary. An official who verifies the borrower’s identity.
• Coborrower. Anyone listed on the loan with you, such as a spouse.
• Co-signer. Someone who has agreed to take responsibility for repaying the loan if you default.
• Attorney. In case you want legal explanations or advice on the documents you are signing.

What To Expect After Closing on a Mortgage Refinance

After closing day, you’ll have a three-day grace period known as your right of rescission to back out of the refinance if something unexpected happens. After the right-to-rescission period ends, your new loan terms take effect.

Here are the next steps you should take:

• Securely file documents. Make sure you have a safe place to store the signed refinance documents for future reference.
• Adjust the autopay amount to your lender. Chances are your monthly payment amount will change after you refinance. If you autopay your monthly mortgage payment, update the amount.
• Adjust your monthly budget. Your mortgage payment is often your largest monthly expense. When that amount changes, you may need to adjust your budget to accommodate.

If you’re using a cash-out refinance, you’ll typically receive the funds from your lender three to five days after your closing.

How long does closing on a mortgage refinance take?

Your closing typically will take a few hours at the title company office. The overall refinance process timeline typically is shorter than it is for closing on a home, but ultimately will depend on your lender and your financial situation. In general, you can expect the refinance process to take 30 to 45 days.

5 Tips To Successfully Close on a Mortgage Refinance

Here are some tips on how to make your refinance a success.

1. Avoid opening new lines of credit before closing. Your credit score will be temporarily dinged when your lender conducts a hard inquiry. Opening up a new line of credit can further lower your credit score and jeopardize your refinance.
2. Read through the paperwork and ask questions. It may be tempting to rush the refinance process. However, remember that refinancing is a long-term commitment, so it’s important to understand all the details and read the fine print. Clarify anything you don’t understand with your lender.
3. Create a checklist of things you’ll need to bring. There’s a fair amount of paperwork involved when you refinance. It can help to make a checklist of everything you’ll need on closing day so that you don’t forget anything.
4. Choose a setting you prefer to close. Closing on a refinance typically takes place in the title company’s office, but you may ask your lender to close in another setting of your choosing.
5. For a cash-out refinance, ask when you’ll receive funds. It usually takes three to five days to get funds from a cash-out refinance, so ask your lender what its timeline will be.

FAQ: How To Close on a Mortgage Refinance

Here are answers to common questions about closing on a mortgage refinance.

The Bottom Line on How To Close on a Mortgage Refinance

Refinancing can be a great way to save money or tap into your equity, but you should make sure you do your due diligence. Make sure you understand the process and the terms of your new loan. If you properly prepare for closing day and know what to expect, the process will go smoothly.