You’ve heard the phrase before. One of your friends comments that they are in the middle of refinancing their home. If you were someone who nodded without fully understanding what they were doing (or why), you aren’t alone. Although most people don’t refinance their homes, that doesn’t mean it is a bad thing or that you shouldn’t consider doing it. It can be in your financial interest under the right circumstances. To know whether it is the right thing for you, you must first understand it.
What refinancing is in a sentence: It is paying off your old loan and getting a new loan to replace it. Why would someone replace an old debt with a new debt? It is because they are seeking new, favorable terms for their new loan. Usually, people refinance because their new payments will be lower. This may stem from lower interest rates, or maybe they can refinance and will no longer have private mortgage insurance (PMI).
Another common reason for refinancing is divorce. When the divorcing couple is dividing their assets, they will have to decide how to split the home. One person may buy the other out. There are several ways that can happen, but refinancing may be part of the process, depending on their circumstances. They may choose to refinance so that only one of them remains on the note, clearing the other of the debt.
A Few Challenges
Remember that friend who told you they were in the middle of refinancing? People say things like that because it is a process. The paperwork you signed to buy the house is almost identical to what you must sign to refinance. Think of it as re-buying your house. There will even be a closing date, and unfortunately, you will have to pay closing costs again. Though these hurdles may seem significant, people choose this route because they intend on saving money over the long term.
There are scenarios in which you can fold in the closing costs directly into the loan, avoiding you having to bring cash to the closing. Your loan officer may inform you that you are getting money back.
Right to Cancel
Anyone who refinances their primary residence gets the added benefit of being able to cancel it within three business days. After you close, there is a three-day period before the new loan takes effect. This happens regardless of how sure you are that you want to refinance. Your old loan will be paid off when those three days are up.
When the loan has been satisfied, your old lender may refund you the remaining balance in your escrow account (or any other additional money they owe you). They will also be obligated to file a Satisfaction of Mortgage with the Register of Deeds because it demonstrates that the lender no longer has a security interest in your property.
Thomas & Webber Law at the Lake
North Carolina requires you to have an attorney for all types of real estate transactions. Having a lawyer is a means of protecting your interests during a significant financial transaction. For legal assistance with a commercial or residential real estate closing in the Lake Norman area, contact the trusted firm of Thomas & Webber Law at the Lake.
Thomas & Webber Law at the Lake
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