Refinanced mortgages have a couple of different rules when it
comes to closing. For one, there is a mandatory rescission
clause for primary residence mortgages that allows you annul
your loan. You can also choose to close at anytime, which is
beneficial if you think rates will drop in the near future.
Rescission Clause
With a rescission clause, you have three days after closing to
cancel your loan if the property is your primary residence.
Think of it as a "cooling off" period. If you have second
thoughts, you can annul the loan and recoup nearly all the fees.
Most often this clause comes in handy when homeowners are
deciding to tap into their home's equity, but then change their
minds. Other times, a change in job situation or home plans
makes the refinanced mortgage unnecessary.
Once you have annulled your mortgage, you will only have a short
term hit on your credit score from the lender's background
check. It will make little difference if you decided to apply
for another loan in the near future.
Delaying Closing
You don't have to close your refinanced mortgage within 30 days.
You can keep it open indefinitely. However, you have to weigh
your choices carefully. While you are waiting for rates to drop,
you may see them rise while paying your current high mortgage
rate.
Mortgage rates fluctuate on an almost hourly rate, but they do
follow a trend. You can read about general mortgage rate in your
newspaper's finance section or hear it on the evening news. When
the Federal Reserve Board raises or lower rates, it will
eventually impact mortgage rates. But other factors also affect
mortgage rates, making it difficult to predict exact changes.
You also have to remember that every month you delay locking in
rates, you are losing a chance to save money. While a percent
can save you a significant amount of money, a quarter or eighth
of a percent doesn't really make it worth it. Waiting for lower
rates is a gamble that you have a right to.
Know Your Options
Once you begin the refinancing process, know that you aren't
locked into the loan or closing. You have the power to stop the
process even after the loan has closed for three days. You also
have the choice on when to lock in rates. With these options,
you can explore all your financial choices and make the decision
that is right for you.
About the author:
View our recommended mortgage
Refi
lenders. Carrie Reeder is the owner of
ABC Loan Guide, an
informational website about various types of loans.
