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WHAT IS A REFINANCE TRANSACTION?
A refinance transaction involves obtaining financing on a property that is already owned by the borrower(s). A refinance transaction includes obtaining new financing in subordinate priority to your previous mortgage for additional funding or simply a new mortgage used to pay off and replace your previous debt. Similar to your original mortgage application, the new lender will assess your application for financing to see if you meet the criteria set by the financial institution. Such criteria may include but are not limited to income, net worth, property value, and credit history. Once approved for financing, you should receive a letter of approval from the bank setting out the terms of the new mortgage. If the terms of the mortgage are satisfactory, you will sign the approval letter and the transaction moves on to the next stage, the instruction of the lawyer.
WHY REFINANCE A PROPERTY?
There are many reasons why individuals refinance their properties. These include:
- Better interest rates are available to the borrower through new financing.
- The term of the previous mortgage has now ended, the borrower or the lender does not wish to renew and new financing is obtained to discharge the previous mortgage.
- The borrower wishes to take out equity from the property by taking on larger financing than what is required to discharge the previous mortgage. For example, the borrower currently owes $100,000.00 on the property. He or she obtains a new mortgage in the amount of $150,000.00. He pays off the previous mortgage of $100,000.00 and is left with $50,000.00 in cash.
- New individuals are coming on the title of the property, and they need to be approved for a new mortgage before title can be transferred to their name.
WHAT ARE THE STEPS INVOLVED IN A REFINANCE TRANSACTION?
STEP 1 – Generally, lawyers only get involved after the approval process has taken place. Your lawyer will receive a set of documents referred to as ‘instructions’ from your bank. Once these instructions are received, your lawyer reviews them to see what conditions must be satisfied before the lender funds the transaction.
STEP 2 – You sign a retainer agreement with your lawyer authorizing them to represent you on the transaction. At this point, your lawyer will begin gathering documentation such as your identification, property tax bill, status certificate, and mortgage statements as necessary.
STEP 3 – Your lawyer conducts the necessary due diligence and satisfies the lenders’ conditions set out in the mortgage instructions. Once this has been done, you will sign documents related to the transaction with your lawyer and your lawyer proceeds to request the funds from the bank for the day of closing.
STEP 4 – Once the lender funds the transaction on the day of closing, your lawyer will register the mortgage, disburse funds, and attend to the discharge or payout of previous mortgages, if any.
STEP 5 – After the completion of the transaction, your lawyer will report to the bank confirming the completion of the transaction. Your lawyer should also provide you with a report together with all documents related to the transaction for your records.
HOW WE CAN HELP
Whether you own a commercial or residential property, our real estate law team has the necessary knowledge and skill to represent you in a refinance transaction. We represent borrowers and lenders in all kinds of refinance transactions including transactions involving institutional lenders, B lenders, and private lenders. We will conduct a free initial consultation, where we will evaluate your personal situation and ask you questions to determine the purpose of your refinance transaction. Once you have agreed to retain us, we will send you the necessary retainer documentation and send you information that clarifies the various steps involved in the transaction. We will then conduct the necessary due diligence and guide you through every step of your transaction. Our real estate law team is highly organized, and we treat every single transaction with diligence and priority. We take a modern approach to the management of transactional matters by utilizing technology to streamline our internal file management processes thereby expediting client transactions and saving costs. Our real estate team is trained to be highly communicative with clients and we are meticulous about organizing and responding to client communications in a timely manner.
If you are refinancing your property, contact us today for a free consultation and quote. A helpful member of our staff will answer any questions you may have about your transaction and the steps moving forward.