Guide · Refinancing
How a refinance escrow works
A refinance escrow uses your new loan to pay off the old one. There’s no buyer or seller. On most refinances of your main home, federal law gives you three business days after signing to cancel, and the lender can’t pay out the new loan until that time is up.
What is a refinance escrow?
When you refinance, a new loan replaces the one you have. Escrow sits in the middle. It gets the exact payoff from your current lender, holds your signed loan papers and waits for the new lender’s money. Then it pays off the old loan and the costs. The new deed of trust is recorded with the county. It’s the paper that makes your home the security for the new loan.
There’s no buyer and no seller, so there are fewer moving parts than in a sale. The steps still go in order, and federal law adds a waiting period near the end for most refinances of a main home.
The steps of a refinance
Your lender sets the schedule. This is the usual order.
Step 1: Escrow opens
Your loan officer opens escrow with us, or you do. We ask your current lender for a payoff demand, the exact amount to pay the loan in full. The lender has to send it within 21 days of a written request (Civil Code §2943).
Step 2: Your Closing Disclosure
Your lender must give you a Closing Disclosure at least three business days before you close. It shows your final loan terms and costs. A home equity line of credit (HELOC) comes with a different loan disclosure instead, says the Consumer Financial Protection Bureau (CFPB).
Step 3: You sign
You sign the loan papers in front of a notary. Bring a current photo ID, such as a California driver’s license or a U.S. passport (Civil Code §1185).
Step 4: The three-day wait
On most refinances of your main home, you have until midnight of the third business day to cancel. Saturdays count, but Sundays and legal public holidays don’t. The clock starts after the last of three events: you sign, you get your Closing Disclosure, and you get two copies of the notice of your right to cancel (CFPB). Until the wait is over, the lender may not pay out the loan money, except into escrow (Regulation Z, §1026.23).
Step 5: Funding
After the wait, the new lender sends the loan money. Escrow checks it against the payoff and the costs in the instructions.
Step 6: Payoff and recording
Escrow pays off the old loan and the costs. The new deed of trust is recorded with the county recorder. The old lender then has 30 days to send its trustee the papers to release its lien, and the trustee has 21 days to record the release (Civil Code §2941).
Who has the right to cancel?
The three-day right comes from federal law, and it applies only to loans on your main home (Regulation Z, §1026.23).
You can cancel
- A refinance of your main home with a new lender
- A home equity loan on your main home
- New money you borrow when you refinance with your same lender
You can’t cancel
- A loan to buy a home
- A loan on a second home or a rental
- The part of a same-lender refinance that only replaces your old balance and its costs
What should I have ready?
Have these handy. We’ll ask if anything else is needed.
For escrow
- A current photo ID for signing
- Your current lender’s name and your loan number
- Any other loan or line of credit on the home, with its lender’s name
- Your homeowners association’s name, if you have one
Good to know
- Your new lender sets your first payment date in your loan papers
- To cancel, you write to the lender. A phone call doesn’t count.
- Keep paying your old loan until escrow pays it off
How Alliance Mutual Escrow helps with a refinance
We order your payoff when escrow opens and check it line by line. We schedule your signing around your loan papers, and we tell you and your loan officer when the loan funds and when it records.
Questions about refinancing
Can I cancel a refinance after I sign?
Often, yes. When you refinance the home you live in, federal law usually gives you until midnight of the third business day after signing to cancel. The rule doesn’t cover a loan to buy a home, or a refinance with your current lender that adds no new money. The lender holds off on paying out the loan until that time has passed (federal rule 12 CFR 1026.23).
When does the three-day right to cancel start?
After the last of three events: you sign the loan papers, you get your Closing Disclosure, and you get two copies of the notice of your right to cancel. You then have until midnight of the third business day. Saturdays count, but Sundays and legal public holidays don’t. If the last event is on a Friday, with no holiday in between, you have until midnight Tuesday (Consumer Financial Protection Bureau).
How do I cancel a refinance?
In writing. Send the lender a written notice before the deadline, on the form it gave you or in a letter. A call or a visit doesn’t count. The lender then has 20 calendar days to return what you paid for the loan. Your old loan stays in place, so keep making its payments (Consumer Financial Protection Bureau).
Can I skip the three-day wait?
Only for a real personal financial emergency. You give the lender a dated, written statement that describes the emergency and gives up or changes the right. Every owner who has the right to cancel signs it, and printed forms aren’t allowed (Regulation Z, §1026.23).
Why is my payoff higher than my loan balance?
A payoff covers more than the balance. It adds the interest up to the day the loan is paid, plus any charges your lender is owed. The lender’s payoff demand statement lists each amount and the interest per day, so the total can be figured for the payoff date (Civil Code §2943).
Sources and fine print
- CFPB: How long do I have to rescind?
- CFPB: Can I change my mind after I sign? (the right of rescission)
- CFPB: What is a Closing Disclosure?
- CFPB: Regulation Z §1026.23, right of rescission
- Cal. Civil Code §2943 (payoff demand statements)
- Cal. Civil Code §2941 (releasing a paid loan)
- Cal. Civil Code §1185 (ID for a notarized signature)
Sources checked September 2026. Page updated . General information, not legal or tax advice.