Want to keep more money in the bank by securing a better interest rate? Thinking it’s a great time for a refi? You may be right. You may also be wondering whether you should refinance your mortgage with the same lender or look elsewhere.
It’s an excellent question, and the answer can vary based on your particular situation and current lender. Here are a few things to consider before deciding to refinance with the same lender.
Pros of Refinancing With the Same Lender
One benefit of refinancing with the same lender is that you already have a preexisting relationship. If you’re satisfied with your current lender, that may be an incentive for you to stay. But keep in mind that even if your current lender has met or exceeded your expectations, you may find it’s more financially beneficial to shop around when it comes to refinancing.
Reduced Closing Costs
Closing costs impact the overall cost of your loan. According to Business Insider, average closing costs for a refinance are about 3 to 6 percent of the principal loan amount. However, closing costs vary by state. In Washington State, for instance, average closing costs in 2021 were just over $3,800 while in Delaware they were over $7,200.
But if you’re a borrower in good standing, you may be able to shave off some of that cost. Since your lender has already closed on your loan once before, you may be able to get some fees reduced or waived altogether. Ask your current lender if the loan origination, home appraisal, or title insurance fees can be reduced or waived.
In a rush to close? Sticking with your current lender may be to your benefit then. Because of your preexisting relationship, your lender should have a lot of your information, such as your financial records, already on file.
According to Forbes, the average mortgage refinance takes about 45 to 60 days to complete. If you’re in a hurry, find out if your current lender is able to move the process along more quickly. Your lender may be able to waive certain requirements, such as the appraisal, for instance. This could help speed up the process.
Cons of Refinancing With the Same Lender
You may have a waiting period before you can refinance your home loan. For example, many lenders require that you wait six months from closing on your home before applying for a refinance. If you closed on your home recently and prefer not to wait six months, you may want to refinance with a new lender instead.
You May Miss Out on Better Deal
Even if you’re thinking about staying with the same lender for your mortgage refinance, be sure to shop around. A home is likely the most significant investment you’ll make in your lifetime. It’s best to do your research to see if you’re getting the best possible deal. After all, who doesn’t want to keep more money in their pocket by spending less on interest?
Pros of Refinancing With a New Lender
Better Interest Rate
One of the primary reasons to go with a new lender is that you could get a better interest rate. In addition to comparing interest rates, consider the terms and overall cost of the loan. Be sure to factor in closing costs and loan origination fees, for example. You may find that one lender is offering you a better rate, but the overall cost of the loan actually means you’ll wind up spending more money in the long run.
Not a fan of crunching numbers? Use a refinance calculator to determine how much you can save. It will show you your break-even point (the point in time you will earn back the money you paid for the refi). You can then compare the break-even points of each loan to figure out which lender is extending you the most competitive offer.
More Loan Options
You may also find that a new lender is better able to meet your loan needs. A new lender may offer loan options that your current lender does not, such as a bridge home loan. If you’d like to explore options beyond a traditional refinance, it’s likely to your benefit to meet with other lenders and discuss what other loan options are available.
Improved Customer Service
Think about your experience with your current lender. How satisfied are you overall? Have you had to pay any extra fees?
For instance, some lenders are flexible and will waive a late fee or allow a grace period for making your monthly mortgage payment. Does that apply to your current lender, or do you constantly feel nickel and dimed? If you’re unsatisfied with your current lender, a refinance presents the perfect opportunity to start fresh with a new one.
Is your current mortgage with a for-profit bank? You may want to explore your community credit union instead. At a local level, you’re much more likely to save money on fees, receive quality customer service, and have a better experience overall.
Cons of Refinancing With a New Lender
New Loan Application
Starting the process with a new lender means you’ll need to start the loan application process over. This could mean application and loan origination fees. Check with each lender to see if any of these fees apply and how much they’ll cost you if they do.
A new lender means a fresh start. But it also means the closing process will likely last longer. Since the refinance process can vary in length depending on a number of factors, ask your lender for an estimate of how long it will take to get to the closing table. If you’re saving more money, then it may be worth a little extra time and effort. After all, it’s been said that “good things come to those who wait.”
Are you looking for a home loan refinance in Washington State? Or do you have more questions about whether to refinance your mortgage with the same lender? If so, contact Solarity Credit Union. We love finding our members new ways to save.