Most homeowners are used to sending money to their mortgage company, but rarely do they receive money back. However, certain circumstances may lead to a refund or payment from your mortgage. A refinance, refund or reverse mortgage may allow you to receive a disbursement check from the mortgage lender, a loan servicing company or a third-party escrow service.
A mortgage lender may bill you and collect your monthly payments each month, thus "servicing" your loan. However, some lenders subcontract these duties to a loan servicing company, which operates independently of the lender. You might receive a disbursement check from either of these sources, depending on how your mortgage servicing is set up.
Disbursement From A Cash Out Refinance
A cash out refinance involves paying off an existing mortgage with a new loan. At closing, you receive money back in the form of a single, lump-sum check or wire transfer, depending on your preference. An escrow or title company usually arranges the disbursement of the proceeds. If you elect to receive a check, the company typically mails or couriers the disbursement check to you, or makes it available for pick-up within a few days of the cash out refinance.
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Escrow Account Refunds
A mortgage may be subject to an escrow or impound account, for the collection and payment of taxes and insurance, which could result in you receiving an escrow disbursement. A mortgage lender typically requires that you establish an escrow account if you owe more than 80 percent of your home's value when obtaining a mortgage. The account allows you to remit payment for your homeowners insurance premium and property taxes in monthly installments, along with the mortgage. The lender deposits escrow payments into a separate account and draws from it when these bills become due.
Each year, your lender must refund any excess of actual expenses, or any surplus beyond what it can legally maintain in the account as reserves. By law, your lender can only maintain reserves equal to two months worth of escrow charges. Any overage in the escrow account must be refunded to you and may arrive in the form of a disbursement check.
Reverse Mortgage Payouts
Rather than pay their lender, homeowners 62 years and older can tap into home equity with a reverse mortgage. The reverse mortgage lender pays the homeowner part of the home's equity in one of several ways:
- A single, lump sum upon obtaining the reverse mortgage
- Fixed monthly payments for a set amount of time or for as long as the homeowner stays in the home
- A line of credit from which the homeowner can draw, much like a credit card
- A combination of these payment methods
The homeowner can opt for a disbursement check if receiving a lump sum or fixed monthly payments.