SMART FAQs About Refinancing Your Mortgage

The current mortgage that is being paid off at closing receives a payoff that includes seven days of daily interest beyond the date of disbursement from an escrow company like SMART. This money is routinely collected to ensure complete payoff and closure of the old mortgage. A payoff short by even a dollar can be rejected by the lender, and in that case, the lender continues to collect daily interest. The cushion is there to protect the borrower from a situation like that. The old lender will refund any excess daily interest it receives, as well as any funds sitting in the lender’s escrow account, via mailed check. This refund takes about two to three weeks from your closing to process.

• Be mindful of the disbursement date when deciding when to stop making mortgage payments. Late fees on the old mortgage will accrue for payments made after the 15th of the month.
• Autopay for the old mortgage should be turned off because SMART’s payoff of the mortgage does not necessarily extinguish the autopay. Luckily, all overpayments must soon be refunded by the old lender, so it is better to pay too much than too little.
• Typically, the title company is not made aware of the escrow balance for the old loan. In rare cases, it is listed on the payoff, but you should assume your title company does not have that information. The borrower is in the best position to check the balance on their escrow account directly with the lender.

This answer depends on the type of loan you get and the requirements of your lender. Generally, lenders require between 5% and 20% equity for conventional mortgage loans. However, if you refinance to an FHA home loan, only 3% equity is required. Keep in mind that your home will likely be appraised when refinancing to reflect its current value, which could affect your current equity.

There are a few ways the refinance costs are structured. Closing costs range between 2-5% of the mortgage balance. Some lenders waive these fees in exchange for a higher interest rate, and some lenders add the closing costs to the balance of your mortgage. It is also important to find out if your current mortgage lender has a pre-payment penalty clause and to know your place in the amortization process.

Refinancing creates a brand new mortgage loan, and as with any loan, you must apply for it and be approved. The lender will check your credit and income in that process. If a conventional lender denies your application and your score is 620 or higher, consider refinancing with an FHA home loan.

You are free to choose your refinance lender, but many homeowners choose to use the same lender because it has your payment history, offers competitive rates, and often waives some of the closing costs. For example, Smart 4 Life means that customers who close with Smart are guaranteed the lowest fees for life.

Some homeowners choose to refinance because they need cash for other expenses, such as home improvements or debt consolidation. The cash-out refinance loan is a new home loan that pays you the difference between your home’s value and your mortgage balance. The cash from the loan is paid to you at closing.

Principal residence refinances are subject to a three-day rescission period. Per federal statute, the borrower has the right to cancel the loan within three full business days, not including the closing date. This time period cannot be waived. This means that the signed documents and funds are held in escrow until the rescission period has expired, and only then does the loan fund. The closing disclosure will have both a closing date and a disbursement date on the top of Page 1.

A second mortgage occurs when you use your equity to receive a loan or line of credit. Second mortgages are considered riskier than first mortgages, so you may find that lenders require that you pay off those encumbrances before refinancing.