Do You Get a New Deed When You Refinance?
Does refinancing impact your property's deed? Understand the distinction between ownership and your mortgage loan.
Refinancing a home loan often leads homeowners to wonder about its impact on their property ownership documents. A common question arises regarding whether a new deed is issued when refinancing. Understanding the distinct roles of a deed and a mortgage in real estate transactions helps clarify this process. A property deed serves as proof of legal ownership, while refinancing involves replacing an existing mortgage loan with a new one.
Understanding Deeds and Mortgages
A deed is a legal document that formally transfers ownership of real property from one party to another. It contains crucial details such as the names of the current and new owners, and a legal description of the property itself. Deeds are typically recorded with the local county recorder’s office, making property ownership a public record. This recording provides public notice of the transfer and helps protect the new owner’s rights.
In contrast, a mortgage, or a deed of trust in some states, is a financial instrument that creates a lien on the property as security for a loan. It is a legal agreement between a borrower and a lender, indicating that the property serves as collateral for the debt. The lender holds this lien until the loan is fully repaid, but the homeowner retains the deed and thus, ownership of the property. Mortgages are also recorded in local government property records, but they do not transfer ownership.
How Refinancing Affects Your Property Title
When you refinance your mortgage, a new deed is not issued. Refinancing means you are taking out a new loan to pay off your existing mortgage, effectively replacing one debt obligation with another. Your underlying ownership of the property, as established by your original deed, remains unchanged. This is because the refinance transaction concerns the loan secured by the property, not the ownership of the property itself.
The process involves the new mortgage or deed of trust being recorded, and the prior mortgage being released. This new recorded document establishes the new lender’s lien on your property. While the lender’s interest in your home is updated, your name on the property deed, which signifies your ownership, stays the same. The homeowner’s title insurance policy also remains in effect.
Documents You Receive During a Refinance
While a new deed is not part of a typical refinance, you will receive several important legal documents:
A new Promissory Note, your formal written promise to repay the refinanced loan. This note outlines the loan amount, interest rate, payment schedule, and consequences for late payments.
A new Mortgage or Deed of Trust, the legal document that creates the new lien on your property. This document grants the lender the right to foreclose if loan terms are not met.
A Closing Disclosure, provided at least three business days before closing. This form itemizes all final loan terms, projected monthly payments, and closing costs.
For primary residences, a Right to Cancel (Rescission) Notice, allowing you to cancel the refinance transaction within three business days after signing.
Situations Requiring a New Deed
A new deed becomes necessary in situations that involve a change in property ownership:
When you sell your property, a new deed is prepared to transfer ownership to the buyer.
If you add or remove an owner, such as due to marriage, divorce, or inheritance, a new deed must be executed and recorded to reflect the change in legal title.
Transferring property into a trust or an LLC also requires a new deed to convey ownership from the individual to the entity.
If you change how the property is titled, for example, from joint tenancy to tenants in common, a new deed is needed to formally document this modification in ownership structure.
These scenarios directly impact who legally owns the property, necessitating a new deed to reflect the updated ownership.