You are refinancing your mortgage loan to take advantage of a lower interest rate and taking a few dollars out of the property in order to make some home improvements. You have signed the very last paper in the very large stack and now you are ready to walk away with a check. Not so fast. If you are refinancing your primary residence, no funds will be disbursed until three business days have elapsed, during which time you are able to cancel your transaction.
For example, if you sign the mortgage documents on Monday, February 2, you will have up until midnight of Thursday to change your mind. Your loan will fund on Friday, February 6, absent your not cancelling. This day is known as the funding date.
You might say: I am not going to cancel, so why not give me my money today? Sorry, unless there is an undo hardship (and you would have to prove it to the lender), no money will be disbursed prior to the funding date. And having to pay for the large screen television being delivered the next day is not a hardship.
It is very important to keep this rule in mind especially when cashing-out. The title agent cannot change your funding date and your mortgage lender will not release any funds to the title agent until the three day right to cancel period has expired. This time frame is also known as the rescission period.
All payments being made on the HUD1, including any funds back to you, will be available on February 6. Your mortgage payoff check will be sent via an overnight carrier for delivery on Monday the 9th. However, it is standard practice for the title agent to collect an extra day’s interest (some times two days) - to the 10th – just as a cushion. The lender will return to you any interest paid but not due.
The three-day rule requirement does not apply to investment properties and in most cases to second/vacation homes.
