In a refinance transaction the current owner of a property obtains a new mortgage, and the old mortgages are paid off and discharged of record. Usually this is done because the owner has obtained a more favorable interest rate or better terms. Sometimes, people refinance in order to take the equity out of their home.
I. The Attorney’s Role
Witt Law will review the loan commitment, order the title search, and prepare the transaction for closing. We will submit a complete closing package to the new lender, complying with all of the lender's title requirements, prepare the closing statement, and conduct the closing. In addition, our office will order a new survey if required by the lender and asked by the borrower. After the closing, we will record all necessary documents and pay off existing mortgages as applicable.
II. Title Insurance for a Refinance Transaction
Title insurance is required when you refinance your property. This is because each time you allow a new mortgage on your property, it is considered a separate event. If there is a new lender, or simply a new loan, that new loan must be insured. In addition, a new title search must be obtained to make sure that there have been no intervening liens, or title defects since the time that you purchased or last refinanced the property.
A refinance transaction requires that a new lender's title insurance policy must be issued. However, since a new owner's policy is not required, the cost of the title insurance should be less then when you purchased. The cost of title insurance is regulated by law, and in the case of a refinance will be based on the amount of the new loan.
You may save money on title insurance if you provide our office with a copy of the title policy that was issued to you when you purchased the property. If the title company is provided with this “back title”, and the policy is less than 10 years old, they are permitted to charge you less for the updated title insurance/searches.
III. Other Requirements: Survey & Insurance
In a refinance transaction, most lenders will accept your current survey depending upon its age. You may be able to sign a “Survey Affidavit of No Change” if you have not made any changes to the property or the structures since the date of your most recent survey. Of course, you will need to provide our office and the lender with a copy of your survey. We do not order new surveys for a refinance transaction unless the client specifically requests us to do so.
With respect to homeowner’s insurance, your loan commitment will likely specify that you need to obtain insurance, insuring the new lender and the new loan amount. Most lenders will not permit you to close unless you have provided them with a declaration page from the insurance policy together with a receipt evidencing that you have paid for the policy for one year in advance.
IV. The Closing
The closing will occur at our office. The procedure is essentially identical to a purchase transaction, except that there is no Seller. You will need to be present, together with your spouse or partner, if applicable. We will review and explain all of the documents to you and will conduct the closing.
Following the closing, this office will attend to all of the post-closing aspects of the transaction. Within a few weeks after the closing, you will be provided with all of the relevant documents from the closing. You can expect to receive a statement or coupon book from your new lender so that you can begin paying on your new loan. If you don’t receive either, please contact your lender directly. Many lenders allow you to have the monthly payments deducted automatically from your bank account. Check with the lender if you are interested in that feature.