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Should You Refinance With the Same Lender?
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Choosing to refinance with the same lender can help simplify the process of replacing your existing mortgage, but there are several factors to consider before you take that step. It’s worth exploring other lenders first to ensure your current lender has the best deal for you.
- Can you refinance with the same lender?
- Closing costs on a refinance with the same lender
- Why you should shop around for your mortgage refinance
- How to negotiate a refinance offer
Can you refinance with the same lender?
The short answer is, yes, you can refinance with the same bank or lender.
If you’re satisfied with your current lender, that could be enough motivation to refinance with the same lender. But while the benefits of good customer service are significant, you’ll still want to ensure your existing lender can meet your refinancing goals before you sign on the dotted line.
If you do work with your current lender, be sure you fully understand the terms of the new loan. Just because you’ve worked with it previously doesn’t mean you shouldn’t scrutinize everything. If you’re struggling to decide whether the new loan terms make sense in the long run, a mortgage refinance calculator can help you get a better understanding.
Advantages of refinancing with the same lender
Some of the benefits of working with your current lender on a refinance include:
- An established relationship, which could make it easier to get through the entire process.
- Lower fees, especially if your lender is invested in keeping you as a client.
- A potentially shorter timeline, which could get you to the closing table faster than the average 40 days it takes to close a refinance.
Closing costs on a refinance with the same lender
You’ll pay closing costs on a refinance, just as you did when you first took out your existing mortgage. Refinance closing costs 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, according to Barry Zigas, a senior fellow and former housing policy director with the Consumer Federation of America (CFA). The CFA is a nonprofit consumer advocacy organization.
“A current lender has the ability to negotiate with you on the total package, because there’s an advantage to them to keeping the loan with them,” Zigas said.
Examples might include:
- No (or lower) title insurance fee
- No additional (or lower) mortgage insurance fee
- No (or lower) loan origination fee
Why you should shop around for your mortgage refinance
It’s wise to shop around for a better deal to find the best pricing for you, even if you’re prepared to refinance your home with the same lender.
That’s because a mortgage is the largest obligation you’ll likely have in your lifetime, Zigas said.
“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 added.
Do your due diligence by:
- Asking for lender recommendations from family members and friends.
- Checking lender reviews to help you identify potential mortgage companies with which you’d do business.
- Shopping around with at least three to five lenders to ensure you’re getting the most competitive offers.
When filling out your mortgage applications, FICO recommends rate shopping within a specific time period to minimize the impact on your credit score. This time period generally ranges between 14 and 45 days, though the length will ultimately depend on when the inquiries are made and which scoring formula is used.
You’ll receive a loan estimate within three business days of each refinance application. Compare the offers you receive from each lender, and take the time to review all loan terms and estimated fees.
How to negotiate a refinance offer
Negotiating refinance offers works much like any other negotiation would. Take the following steps to work your way toward the best possible deal.
- Gather your loan estimates and review the numbers. As Zigas recommended, focus on the estimated interest rate, loan term and upfront and ongoing loan costs.
- Ask each lender if they’ll lower or waive some of the refi costs. Request an appraisal waiver and lower origination fees. It may also be worth buying mortgage points to get a lower rate.
- Make lenders aware that you’re shopping around. If you share this info, they’re more likely to compete for your business.
- Pay attention to the services you can independently choose. Page 2 of your loan estimate includes the third-party services you can shop for, including title search and insurance, pest inspection and property survey.
Refinancing your mortgage is more about the financial benefit you’ll get from the new loan rather than which lender you choose. Choose the company that provides you with the most favorable terms and pricing — even if that means ditching your current lender for a new one.