When you refinance your home, you will find the application and processing to be very similar to the initial mortgage process. If you crunch the numbers and decide you need to back out of a refinance before everything is settled, it's not the end of the world. Although it's a stressful situation for you, the professionals involved with the loan know how to cancel the process.
While you can back out of a refinance before everything is settled, you may not be able to recoup certain fees and expenses that you incurred during the process.
Loan Processing Period
This is the period when the lender works to satisfy conditions for approval and process your loan. Common documents that the lender will gather include a real estate appraisal to determine the value of your home, title search to order title insurance, employment verification, real estate inspection and a statement of the current mortgage to facilitate a payoff of the mortgage. If the lender proceeds through these processes, you will likely incur expenses by canceling because the lender will charge you for work already done to process the loan.
Lenders often charge a general application fee to cover processing costs and the cost involved with checking your credit score. If you cancel a refinance before the closing, you should expect the application fee to be nonrefundable. According to Bank.com, the credit report fee can cost $25 to $100, while the general mortgage application fee can cost as much as $500, depending on the lender.
The closing is the meeting where you meet with representatives of the lender and the title company to sign loan papers. If you decide at the closing that you don’t wish to go through with the refinance, simply do not sign the papers. You should expect to pay the expenses incurred from the loan approval process – appraisal, title search and inspection – as well as the application fee and possibly even closing fees if you back out of the refinance at the closing.
The rescission period is a three-day period during which the buyer can cancel the loan. The clock starts to run from the time of the closing. If you decide to cancel during the rescission period, expect to pay all the same charges and fees that you would pay if you canceled earlier. You may incur an additional charge by waiting to cancel until the rescission period because by this time the title company has completed the title work and issued the title insurance. Lenders do not typically disburse funds for a mortgage and a refinance until after the rescission period ends.
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