Today’s lower interest rates have spurred you to refinance your mortgage. Now you can expect to reap the benefits of substantially reduced monthly mortgage payments, but you can also expect to pay the lender the typical closing costs associated with any mortgage loan.
Why? Because from the lender’s standpoint, a refinanced loan is no different than any other mortgage loan. So be prepared for service fees or points and other expenses — including a new charge for title insurance.
Title Insurance is Important When Refinancing
Why do you need to buy title insurance again even though you purchased a policy when you first bought your home and there is no change in ownership?
It’s because a separate policy is needed by the lender insuring the validity of your mortgage when it is made.
For as long as you own the property your mortgage is valid, but it doesn’t insure the new mortgage created when you refinance, and it doesn’t provide protection against events that may have transpired between the time you purchased the property and when it is refinanced.
For example, you may have taken out a second mortgage on the home that could threaten the priority of the new lender’s mortgage. Or, there could be legal judgements against you or a mechanic’s lien against the property by a supplier who wasn’t paid for home improvements.
Lenders also insist on a new title policy because many mortgages are packaged as securities and sold to investors in the secondary mortgage market. Title insurance is the only practical way to provide the assurance that investors demand and ensure that the mortgages backing these securities are valid and enforceable.
For your refinance transaction with some title insurance companies, you may qualify for a special title insurance rate based on the loan amount. There may be additional charges for recording fees, closing fees, and endorsements. Your lender can provide you with an estimate of these costs.
How to Prepare for Your Refinance Closing
Once you have made the decision to refinance your home, you’ll want your transaction to progress as smoothly and efficiently as possible. In an effort to avoid potential problems and delays, consider the following points. Check with your real estate agent to determine which ones apply to you.
- Bring a Cashier’s or Certified check to the closing for the amounts you must pay, not a personal check.
- Bring an original Homeowners Insurance Policy to the closing along with a paid receipt for the first year’s premium. If you’re refinancing a condo, bring a Certificate of Insurance instead. A Certificate of Insurance can be obtained from your condo association or property management company.
- Before the closing, contact your lender regarding any additional requirements that must be satisfied prior to closing.
- Bring personal identification that includes your picture and signature to the closing.
- If you have an existing mortgage(s), a current pay off letter(s) must be presented at closing. Contact your lender for instructions on how to obtain a current pay off statement(s).
- If you are going to be paying off credit card balances at the closing, the most current statements must be brought to the closing.
- If your property is a condo, bring an assessment letter from your condo association or property management company to the closing.
- If your transaction requires a Notice of Right to Cancel, disbursement may be delayed until the fourth day following the day of the closing.
(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)
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