Just because a mortgage refinance serves a financial need doesn't mean you should be at the mercy of a mortgage company. You, as the consumer, have rights that are protected by state and federal laws. Understanding your rights when dealing with a mortgage company can prevent you from getting in over your head.
You have the right to know exactly how much your mortgage refinance will cost over the life of the loan. Your lender is required by law to send a truth-in-lending disclosure within three business days of your application. This document details the principal amount borrowed, the interest rate, the proposed monthly payment, and the total interest to be paid over the life of the loan. These terms are subject to nominal changes depending on the timing and amount of the refinance. However, if a significant change in terms occurs -- an increase in the amount borrowed, for example -- the lender must update and re-disclose.
Good Faith Estimate
You have the right to know how much you’ll have to pay at closing. Along with the truth-in-lending disclosure, your mortgage lender will provide a good-faith estimate of closing costs, again within three days of application. This document will outline the charges you can expect if you close the loan under the terms and conditions for which you applied. As you can tell from the name of the document, these figures are an estimate and often change. However, the bank must give you, upfront, its best estimate of how much cash you’ll need to provide.
You have the right to privacy when applying for a mortgage refinance. The lender will send a privacy disclosure detailing its promise not to share or release any information that you provide them with during your refinance application. This also applies to the current lender being refinanced. Your current lender will only provide the new one with information if it has your consent.
Right of Rescission
Even after the refinance has closed, you have the right to change your mind and cancel if you’re refinancing with another lender. This is known as the right of rescission. You have three full business days to cancel the loan once the documents are signed. This is why the funds won’t be sent to the lender being paid off until after the rescission period expires. So if you close your refinance on a Monday, the rescission period is Tuesday, Wednesday and Thursday, assuming none of those days are holidays. The refinance will be completed when the funds are wired to the lender being paid off on Friday.
Carl Carabelli has been writing in various capacities for more than 15 years. He has utilized his creative writing skills to enhance his other ventures such as financial analysis, copywriting and contributing various articles and opinion pieces. Carabelli earned a bachelor's degree in communications from Seton Hall and has worked in banking, notably commercial lending, since 2001.