Signing the papers and closing a loan can be a totally different thing. Once your loan closes, the only party that can cancel a loan is you. However, commitment letters can have conditions that let lenders cancel the loan for certain reasons at any point until the loan truly closes. It’s always best to check in with your lawyer or financial advisor if you’re considering a refinanced mortgage loan or canceling a refinanced loan once papers have been signed.
Borrower’s Right of Rescission When you refinance your mortgage, Federal law gives you the right to cancel the loan for up to three days after you sign the documents to close the loan in most cases. This right of rescission gives you a cooling-off period so that you can think about the loan you just took out and decide if it is really in your best interest. If it isn’t, you have an option to send your lender written notice and cancel the refinance. There are several other factors that go into the process, so it’s best to consult with a legal expert on the matter before sending your written notice to your lender.
Lender Commitments When your lender commits to fund a mortgage or refinance, that approval usually comes with several conditions. If your financial standing experiences any sort of material or substantial change before the loan is closed, the lender can appeal the loan. Lenders can reserve the right to check up on your personal finances throughout the refinance process. Your lender can also request to check your credit report the day before the closing to ensure that nothing has changed.
Signing vs. Closing Just because you signed your loan documents doesn’t mean that you’ve closed the loan. It’s possible for borrowers to sign all their documents in advance. If you do this, the documents get held, but the loan isn’t closed. Your lender can still potentially cancel the loan between the time your documents are signed and when the loan closes if the documents are being “held” and the lender hasn’t formally consented to a written agreement.
After Closing Although it’s rare, it is even possible for your lender to pull a refinance loan after closing. Technically, your loan doesn’t actually fund during the rescission period, so the lender could decide to not send the money. If you aren’t in some form of default, though, this would be a breach of contract. One instance where this could happen, though, is if you were to fail to bring any documentation that your lender requires to the closing. If you sign the documents but don’t provide exactly what the lender required, your loan could be pulled.
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About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2013 ConsumerInfo.com, Inc. All rights reserved.