Should You Refinance With the Same Lender?
When you decide you want to refinance your mortgage, it might seem appealing to minimize the stress and work involved by reaching out to your existing mortgage company. But is it the best deal to refinance with the same lender?
Only you can definitively answer that. Choosing to refinance with the same lender can help simplify the process, but it’s worth exploring other options to ensure you’re getting the best rates.
In this article, we’ll examine considerations to think about before you refinance with the same lender, including:
- Can you refinance with the same lender?
- Closing costs when refinancing with the same lender
- Why you should shop around for your refinance
- How to negotiate a mortgage refinance offer
- The bottom line
Can you refinance with the same lender?
With the lower-rate environment that has been hanging around for a while, you might be wondering: Can I refinance with the same lender? The short answer is yes.
If you’re satisfied with where you are, this might seem reason enough to refinance with the same lender. While the benefits of good customer service are significant, you’ll still want to ensure your existing lender can meet your financial goals for refinancing before you sign on the dotted line.
You may also benefit from better timing when you refinance with the same lender. The average time to close a refinance loan is 39 days, according to Ellie Mae’s latest Origination Insight Report. However, working with your existing lender could speed things up because they’ve worked with you before.
If you do work with your current lender, be sure you fully understand the terms of the new agreement. Just because you’ve worked with them previously doesn’t mean you shouldn’t scrutinize everything. If you’re struggling to decide whether the terms of your new loan make sense in the long run, use a mortgage refinance calculator.
Closing costs when refinancing with the same lender
As you did when you originally took out your mortgage, you’ll pay closing costs on a refinance, which can range from 2% to 6% of your loan amount, depending on the size of your loan.
You could see lower closing fees, though, if you refinance with the same lender, said Barry Zigas, a senior fellow and former housing policy director with the Consumer Federation of America.
“Your current lender should be able to offer you a lower set of closing costs and origination fees because they don’t have to undertake the same level of due diligence on a refi that they do on an origination, if they’ve made the loan to you before in a reasonably recent period of time,” Zigas said.
Why you should shop around for your refinance
Even if you’re leaning toward a refinance with the same lender, it’s worth shopping for a better deal with a few lenders to find the best pricing.
“A small difference in interest rate, a small difference in the origination costs can — over the long run — make a very big difference in the all-in cost of the house,” he said.
Ask friends and family members for recommendations and check lender reviews to help you identify refinance mortgage lenders. Shop around with at least three different lenders to ensure you’re getting the most competitive interest rates and terms.
Once you’ve narrowed down your list of lenders and fill out your applications, try to keep your shopping period to 30 days max. This helps limit the impact that multiple credit inquiries can have on your credit score, according to myFICO.
You’ll receive a Loan Estimate within three business days of applying for a refinance. Compare the offers you receive from each lender, and take the time to review all loan terms and estimated fees.
How to negotiate a mortgage refinance offer
Negotiating refinance offers works much like any other negotiation would. With your Loan Estimates in hand, take a look at the numbers and see how they stack up. Make lenders aware that you’re shopping around; they’re more likely to compete for your business.
When negotiating, Zigas recommends focusing on these items:
- Estimated interest rate
- Loan term
- Loan costs, including origination fees, document preparation fees, mortgage insurance, title insurance, etc.
Ask each lender if they’ll lower or waive some of the mortgage fees involved in a refinance. Additionally, Page 2 of your Loan Estimate includes the third-party services you can shop for, such as title search and insurance, pest inspection and a property survey.
You’ll also want to consider your total closing costs and the total amount of interest you’ll pay over the lifespan of the loan. If a lender is advertising a “no closing costs” refinance, be sure you understand what that means. You may not pay anything out of pocket, but you’ll pay for it in other ways, such as a higher interest rate or larger loan amount (to roll the closing costs into the refinance).
The bottom line
Refinancing your mortgage is more about the financial benefit you’ll get from a new loan rather than what lender you choose. Choose the refinance lender that provides you with the most favorable terms and pricing — even if that means ditching your current lender for a new company.