Canceling Refinance Loan Application to Get Lower Rate

Reader Question:

I applied for a refinance loan several days ago and locked the rate. I have also provided all the necessary documentation. This has cost me nothing other than the $350 I paid the appraiser yesterday. Since locking the rate, current mortgage rates have dropped almost a half point over the past few days.

Would it be unethical of me to cancel the application and reapply for the currently lower rates (most likely with another broker since I’m not sure the current broker will want to work with me if I cancel the refinance at this point)? Other than the expense for the appraisal and possibly the credit report, am I obligated to pay any other expenses or fees at this point, four days into the process?

Response:

We don’t typically handle ethics-related questions, since that’s not the scope of this blog. But as far as the law goes, you should able to cancel your active application by notifying the lender. There might be a fee associated with this though. You’ll have to read through your paperwork and see what it says about cancellation policy and fees.

If you do face a fee for canceling your refinance application with the lender, the question becomes: “Will the money I save with a lower rate make up for the money I pay in fees?” Of course, if there are no cancellation fees then this question becomes moot. You’ll have to review your paperwork and see what it says.

Filed under: Refinance Questions