Question: Hoping for some extra money for Christmas gifts this year, I refinanced my mortgage.  My new rate is great, and my lender paid all of my closing costs except for my escrow deposit and prepaid interest.  I kept my loan balance low by only cashing out couple thousand dollars.  At the closing I was told there was no money left for cash out because of my high escrow deposit.  I signed the documents, anyway, but this defeats my purpose for refinancing.  There is still time for me to rescind; should I?

Answer: You refinanced your mortgage for two reasons: 1-a better interest rate and 2-to pull cash out for holiday shopping.  At lease your long term goal will be met if you go through with the refinance.  However, I have two children and understand the need for extra cash around the holidays.  You may still be able to meet both of your goals.

There is no cash available because of the extra money needed to establish your new tax and insurance escrow account.  While your new lender requires this money paid upfront, there is hope.  If you escrowed your tax and insurance payments with your old lender, it will return its escrow balance to you shortly.  If you go through with your refinance, your old lender is paid off and the escrow balance is mailed to you.  This process usually around 20-30 days, which may or may not be in time for Christmas.  Your odds are better if you are a last minute shopper.

Your other option is to consult with your mortgage representative to see if they can increase your loan amount by a couple thousand dollars.  You will have to sign a new closing package for a new loan, but this will provide your extra cash quicker.  When you receive your old escrow funds, simply add them to your next monthly mortgage payment to reduce the principle balance of your new loan.  The hard part will be resisting the urge to buy that big screen T.V. for the Super Bowl.

Attorney James Haroutunian practices real estate law, estate planning and small business formation in Billerica at 790 Boston Road.  Contact him with questions at 978-671-0711, hlawoffice.com or email him at james@hlawoffice.com.

Dollars, Home, Property, House

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