Are you considering refinancing your home? If so, you probably want to understand more about the process. What is a refinancing loan? What role does a title company have in the process?

UNDERSTANDING REFINANCING

You buy a home with the full intention of making the mortgage payments. However, sometimes other things get in the way of timely payments. Refinancing involves coordinating with a lender to reduce your mortgage payments.  Typically, it is necessary to pay off the original loan first. A refinance loan is a second loan that is used to pay off the first one. Often, a borrower does not receive any funds directly when refinancing their home. In some cases, the entire amount of the second loan is transferred directly to the lender holding the first loan.

Other reasons to refinance may include wanting to remove someone’s name from the mortgage or to take advantage of a lower interest rate.

TITLE RESEARCH

It is typical for a bank to hire a title company to research the title to the property. Before lending the funds to purchase the property, the lender wants to make sure that the loan applicant is the legal owner of the property. The lender also wants to ensure that there are no problems with the title. Even if the title was researched at the time of the initial mortgage, the title might not be “clear”. For example, a title search may reveal a judgment that was filed against the owner since the date of the original mortgage. The lender could require that the judgment be paid before refinancing.

COMMUNICATION IS KEY

Communication is a key function of any title company, but especially when it comes to refinancing. Often the title company is responsible for confirming the amount of money required to pay off existing mortgages. The person responsible for the closing may communicate with the property owner, attorneys, surveyors, government officials, and creditors who are working to resolve title issues before the refinancing occurs. At Homestead Title, we ensure that all of the documents that are required for the refinancing are present at the time of the closing.

CLOSING

The “closing” is the meeting in which the borrower signs the loan documents and makes arrangements to disburse money. Prior to the closing, the title company’s closing agent will prepare a settlement statement that lists all the bills that must be paid from the loan proceeds. After paying all the amounts due, the amount remaining will be disbursed to the borrower. At the closing, the borrower signs the settlement statement along with the refinancing documents, including a new promissory note and mortgage. The closer will then deliver the mortgage to the county recorder’s office.

DISBURSING

If the purpose of the refinancing is to provide additional funds to the borrower, the lender arranges to disburse the money. When a title company is hired to handle the closing, the lender might first deliver the funds to the title company. The title company then delivers money to the borrower and any other parties who are entitled to payment according to the settlement statement. After the closing, the title company might provide the lender with another title search, abstract, or a final title insurance policy to verify the lender’s new mortgage lien on the property.

LEGAL NOTICE AND DISCLAIMER: THE CONTENT HEREIN IS PROVIDED FOR GENERAL GUIDANCE AND ILLUSTRATIVE PURPOSES ONLY AND NOT INTENDED TO BE A GUARANTEE OF SERVICE OR TO BE CONSTRUED AS LEGAL ADVICE OF ANY KIND OR TO FORM AN ATTORNEY/CLIENT RELATIONSHIP BETWEEN HOMESTEAD TITLE, ITS INDIVIDUAL ATTORNEYS, AND THE READER.