LENDER SELECTION:

Shop around for rate, points and expenses, such as application, appraisal, credit report, underwriting, processing, post closing, wire fess and the like. Lenders have a plethora of fees and costs, some of which are cumulative. Fees can add up and it is important to know what the fees will be in order to make a final determination as to which lender is offering the best deal.
Once you have done some homework on the different mortgage products available to you, you should contact your present lender and see what your lender is willing to offer you. Your present lender may be the best source for you to obtain good terms, especially if you have a good record with that lender, because lenders don’t want to lose good customers. But, if your lender is a servicer, it may not originate loans and may refer you to another company. Your final decision should be based on an analysis of mortgage rates compared to expenses. Some lenders will offer you a very good rate, but the closing costs will be so outrageous that it will take you many years to recoup your closing costs through monthly savings.

ROLE OF THE TITLE COMPANY:

The title company provides insurance to the lender on the new mortgage. As part of the service, it runs searches against the property to make sure that there are no violations and that the property occupancy is the correct one for the type of loan that you are seeking.

The services are not free. The title company will charge you a premium for insuring the lender, although this premium is reduced if you paid a mortgage title premium for a mortgage on the same property within 10 years prior to the refinancing. The title company will also charge you some miscellaneous fees for violations and certificate of occupancy searches as well as bankruptcy and patriot searches. There are recording fees, service charges and the like. Some companies can be abusive and you should get an estimate from the title company before the closing and have an attorney review it.

If you are paying off a mortgage, the title company is the one responsible for paying it. However, some times they send the payment and your present lender does not record a satisfaction (cancellation) of mortgage. This is a document necessary to cancel the mortgage in the records of the county where the property is located. A letter from your lender acknowledging payment is not sufficient. You need that satisfaction. Most lenders send the document for recording, and it gets lost. I suggest that you check the records of the county approximately six months after the closing to ascertain whether the satisfaction was recorded. If not, and you let a long period of time pass, the day you try to refinance again or sell the property, the mortgage will continue to show on the records as unpaid. By that time your lender may no longer be in business, or may have discarded your records and then resolving the matter becomes an expensive nightmare.

THE CLOSING:

1. Attorney for the lender: remember that the attorney for the lender represents the interests of the lender, even if you are paying his/her fee. Although most attorneys representing lenders will handle the whole process for the lender and, in most instances, do a better job than if you had your own attorney, his/her interest is to represent the wishes of the lender, which may not necessarily be yours.

2. Three day right of rescission: on primary residences, federal law provides that a borrower have 3 days after the closing to consider the refinance and cancel it at will. The 3 days are 3 full days after the closing and they count Saturday, but not Sunday. You can cancel for no reason at all and everything that you signed at closing is discarded, with no costs to you. My suggestion is that you make an appointment with your attorney immediately after you have been given a closing date, so that the attorney can review the documents with you. This will give you sufficient time to consider the terms and make a decision on whether to proceed or cancel.

3. Investment property: you do not have the 3 days to rescind if the property that you are refinancing is not your primary residence. Thus, it may be a good idea to hire an attorney to attend the closing with you since the decision must be made at the closing and any review after closing would be worthless.

4. The CEM (or CEMA): In New York City there is a mortgage tax (as there is in the rest of New York State, except that the tax is much less than in the City). Every time you take a mortgage you must pay a mortgage tax, which is based on the amount of the mortgage and the type of property against which the mortgage will be recorded (see number 6 below for rates). However, if the lender with which you have the mortgage is willing to assign (transfer) the existing mortgage to the new lender, and the new lender is willing to accept that assignment, you do not have to pay mortgage tax on the principal balance still outstanding on your present mortgage. Technically, your present mortgage will be assigned to your new lender and the new lender will make you sign a mortgage for any additional principal borrowed over what you owe on your existing mortgage. The two will then be consolidated into a single lien, extended (if that is the case) and modified. Thus, the name consolidation, extension and modification agreement. You will pay mortgage tax on the additional principal borrowed, and additional recording fees because the assignment of the existing mortgage and the CEM must be recorded. Often these fees are insignificant compared to your mortgage tax savings, but you must make a calculation of what your savings will be, because some lenders charge a hefty fee for assigning your present mortgage and you may not save anything by doing a CEM.

5. Prepayment penalty: before you decide to refinance look at your mortgage documents to make sure that you do not have a prepayment penalty for prepaying your existing mortgage. Prepayment penalties can run into the thousands of dollars.

6. Mortgage tax rates in New York City:
For one to three family dwellings the rate is 2.05% if the mortgage is less than $500,000.00 or 2.175% if the mortgage amount is more than $500,000.00. For any other real property the rate is 2.05% if the mortgage is less than $500,000.00, but if the mortgage is more than $500,000.00, the rate is 2.8%.

CAVEAT: the City of New York imposes mortgage taxes based on the tax classification of the property regardless of the legal occupancy. There are also some exceptions to the above rates depending on whether the new mortgage that you are obtaining was borrowed less than one year after you obtained another mortgage.
NOTE: throughout New York State lenders pay ¼% (.25%) of the rates set forth above. However, federally chartered lenders, such as credit unions and savings banks, are not obligated to pay them and you may have to pay the full rate. Additionally, lenders generally don’t pay the ¼% on commercial properties.