How Does Escrow Work in a Refinance?

Refinancing involves paying off an existing loan with proceeds from a new loan. Many homeowners use refinancing to lower the term of their mortgage or to lower monthly costs by getting lower interest rates. Refinancing has a similar process to a home purchase, except for inspection instructions.

In a refinance, the parties are the bank and the homeowner, with escrow acting as a neutral third party. Escrow ensures the bank provides funds to pay off the original loan and the homeowner pays closing costs, both of which are necessary to close escrow. Moneyline Escrow will also order a report on the title to ensure the property is free of liens, back taxes, or unpaid loans.

Lenders commonly deny refinancing without the use of escrow.

A house with a percent sign on it. Moneyline Escrow.

Understanding the escrow process is important when refinancing your home. Since real estate transactions include complicated components, escrow agents are in place to help lenders and homeowners track the disbursement of money according to the agreements made.

In a mortgage refinance, you obtain a new loan to pay off a current home loan debt. The new lender may require you to establish an escrow account. When refinancing a mortgage, escrow funds collected at closing are known as “impound reserves,” and their amount is determined by the lender. An escrow account requires you to send in payments for certain expenses each time you send mortgage payments to the lender.

Refinancing your home loan could lower your current mortgage payment while consolidating other debt if the available equity within your home meets certain lending requirements. If you are refinancing with your current home lender, your escrow account may remain intact. However, if you are refinancing with another lender, your escrow account will be closed, and you should receive a check for the remaining balance within 30 days of paying off your former lender.

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Moneyline Escrow is on top of every detail in a refinance

Providing full management and action as a neutral third-party to close the real estate transaction within the guidelines set forth in the contract while serving as the depository of funds and closing costs
Responding to all communications in a timely manner
Keeping all involved parties informed of the escrow progress every step of the way
Following mutual instructions expeditiously
Preparing escrow instructions and ensuring all documents are executed properly
Issuing receipts for deposits of funds in the trust account
Handling of loan documents and instructions from the new lender
Coordinating the services of a notary public
Ensuring proper proration and adjustment of taxes, HOA dues, etc.
Preparing and sending out the estimated and final settlement statements and HUD-1

Instructing the Title Company to record documents, such as the Grant Deed and Deed of Trust
Disbursing funds to proper parties and closing escrow, as authorized
Maintaining security and accountability of funds due to principals by providing several disbursement options
Closing escrow in accordance with mutually agreed written terms
Ordering all applicable reports and disclosures, such as the preliminary title report and HOA documents
Complying with city, state, and federal guidelines as applicable to the subject property
Obtaining approval of documents and reports from all parties
Securing payoff demands or beneficiary statements from existing lenders
Acquiring necessary documentation to clear outstanding liens attached to the property
Requesting demands conveyances of mortgages or the deed of trust to be paid off in escrow

How Does Escrow Work in a Refinance?

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Moneyline Escrow is on top of every detail in a refinance

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