Key takeaways
- Refinancing can help you secure a lower interest rate, potentially saving you thousands of dollars over the lifetime of your loan.
- Refinancing with your current lender may have benefits, like avoiding some of the fees associated with switching lenders.
- While your current lender might offer competitive refinance rates and terms, it’s a good idea to shop around and compare offers from other lenders, too.
One of the biggest questions for someone who wants to refinance their mortgage is who to refinance with. If you’re thinking of refinancing to tap into home equity or change your loan terms, here are the ups and downs of going with your current lender versus one of their competitors.
Can you refinance with the same lender?
You can usually refinance with the same bank or lender that you originally got a loan through. But keep in mind, your mortgage lender is the institution that originated your loan, and that may be different from your current servicer.
Lenders are responsible for processing, underwriting and closing on your loan (among other things). However, these companies often hand over their loans to servicers, who oversee the day-to-day administration of your loan. This includes taking payments, tracking your balance and initiating the foreclosure process if you default.
Because servicers don’t offer their own loans, you’ll need to go through a lender if you’re interested in refinancing. If your mortgage is currently held by a bank or company that originates loans, however, they may be able to extend a competitive rate or terms on a refinance, even if another lender originated the loan.
Is it better to refinance with your current lender?
When deciding whether to refinance with the same lender or a new one, you’ll want to consider a few things.
If you’re just looking for the lowest rate, shopping around to get multiple quotes can help you choose the right mortgage refinance for your needs. Find the best rate and terms with different lenders and see if your current lender will match it. But be prepared to refinance with a different lender if cost is your number one priority.
“Most lenders want to keep their customers, most lenders want to preserve that relationship,” says Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association. “They want to keep the servicing of the loan.”
That means your current lender may be willing to waive some fees or match lower rates that a competitor offers, reducing your costs to refinance. But in general, shopping around is the best way to find the lowest rate. Think of it this way: If you don’t shop around, you won’t know whether your lender is offering you a competitive deal.
Advantages of refinancing with the same lender
- Ease of application – Your lender may already have some of your information on file
- Ease of payment – You won’t have to learn a new way to log in and pay your mortgage
- Account consolidation – If you already do all of your banking at the same place that holds your mortgage, you have fewer accounts to keep track of
Disadvantages of refinancing with the same lender
- You may not get the best interest rate possible.
- You may not get the lowest fees possible.
- You may not get the best loan terms possible.
Why you should shop around for your mortgage refinance
Refinancing can help you secure a lower interest rate, which is a great way to decrease your monthly payment and the amount of money you spend on interest. But to find the best rate, you might have to look beyond your current lender.
“Shopping around for a mortgage is especially important when you’re refinancing,” says Jeff Ostrowski, Bankrate’s principal home lending writer. “After all, a prime goal of a refi is to save money. What’s more, your status as a homeowner with equity and a solid credit score could give you some leverage to lower fees.”
Shopping around and comparing offers is the best way to find the lowest refinance rates possible. This is true when rates are moving more erratically.
Comparison shopping is especially important when rates are bouncing around. Research from Freddie Mac shows that the savings from comparison shopping are amplified during times of rate volatility.
— Jeff Ostrowski, Principal Writer, Bankrate
It might not sound like much, but even a slight reduction in your interest rate can save you thousands of dollars over the loan’s lifetime. Exploring your options also lets you find the loan that matches your goals and needs.
How to get the best refinance rate
Strategies you can use to get the best refinance rate possible include improving your credit score, buying points and shopping around with different lenders. While it may be easier to just go with your current lender when refinancing, you might be able to get a better rate — and save money — by going with one of their competitors.
FAQs
Key takeaways
Is it a good idea to refinance with the same lender? ›
Refinancing with the same lender may or may not work for you and your specific financial situation. Before you opt to remain with the same lender or take your business elsewhere, it's important to compare other lenders and your current lender to uncover which option will be most cost-effective to refinance your loan.
At what point is it not worth it to refinance? ›
Moving into a longer-term loan: If you're already at least halfway through the loan term, it's unlikely you'll save money refinancing. You've already reached the point where more of your payment is going to loan principal than interest; refinancing now means you'll restart the clock and pay more toward interest again.
Do you need an appraisal to refinance with the same lender? ›
Appraisals are important because they assure the lender that you aren't borrowing more money than what your home is worth. In most situations, your lender will require that you get an appraisal before you refinance your loan. This step helps protect the lender's financial interests.
Which is not a good reason to refinance your mortgage? ›
Key Takeaways. Don't refinance if you have a long break-even period—the number of months to reach the point when you start saving. Refinancing to lower your monthly payment is great unless you're spending more money in the long-run.
Is it easier to remortgage with the same lender? ›
The process of remortgaging with the same lender tends to be fairly straightforward. If all you are doing is moving to a new deal and not changing anything else, your existing lender may be happy to proceed without another affordability check, credit check or property valuation.
Is it easier to refinance with the same bank? ›
While it may be easier to just go with your current lender when refinancing, you might be able to get a better rate — and save money — by going with one of their competitors.
Is it dumb to refinance to a higher interest rate? ›
Negatively Impacting Your Long-Term Net Worth
Refinancing can lower your monthly payment, but it will often make the loan more expensive in the end if you're adding years to your mortgage. If you need to refinance to avoid losing your house, paying more, in the long run, might be worth it.
What is the harm in refinancing? ›
Refinancing can save you money if you get a lower interest rate, but you could also end up paying more if you refinance simply to extend the loan term. Refinancing can help you consolidate debt or tap your home equity for extra cash for renovations, but it can also lead to more debt.
How much should rates drop before refinancing? ›
A rule of thumb says that you'll benefit from refinancing if the new rate is at least 1% lower than the rate you have.
This is known as an appraisal gap or a low appraisal. You may have to pay the difference in cash or renegotiate with the seller to keep the deal alive. An appraisal gap resulting from a low appraisal can happen under any market conditions.
Can a refinance be denied after appraisal? ›
Yes, a lender may deny a refinance if the appraisal is lower than the amount you owe on the mortgage. An appraisal establishes a home's fair market value. If the home's fair market value is lower than your requested loan amount, you may not qualify for the entire amount.
What happens if appraisal is lower than refinance? ›
This can be a problem because lenders will only lend on the appraised value. If your appraised value is lower than the agreed upon sales price, you'll have to make up the difference in cash, or cancel the deal.
What do you lose when you refinance? ›
You don't have to lose any equity when you refinance, but there's a chance that it could happen. For example, if you take cash out of your home when you refinance your mortgage or use your equity to pay closing costs, your total home equity will decline by the amount of money you borrow.
What disqualifies a refinance? ›
You have too much debt
The most common reason why refinance loan applications are denied is because the borrower has too much debt.
When not to refinance your house? ›
Here are several scenarios when it doesn't make sense to refinance your mortgage:
- It will take longer to break even.
- You'll pay more in the long run.
- You can't afford the new payments.
- Your credit score isn't in great shape.
- Interest rates are higher.
- You can't afford the closing costs.
- You don't have enough equity.
The process to refinance works in a similar way as applying for your original loan and therefore refinancing on average can generally take 4-8 weeks in total. Of course, the process can vary based on your individual situation and some lenders may even be able to offer a “FASTRefi®”.
Does refinancing hurt your credit? ›
Refinancing will hurt your credit score a bit initially, but might actually help in the long run. Refinancing can significantly lower your debt amount and/or your monthly payment, and lenders like to see both of those. Your score will typically dip a few points, but it can bounce back within a few months.
Can I refinance my car with the same lender? ›
Can I refinance my car with the same lender? Yes, many lenders will allow you to refinance your existing car loan. Keep in mind that lenders may not offer refinancing as an option. Especially if your vehicle is in poor condition, has low value, or you have few payments remaining on your existing loan.
What happens to existing loan when you refinance? ›
Refinancing the mortgage on your house means you're essentially trading in your current mortgage for a newer one – often with a new principal and a different interest rate. Your lender then uses the newer mortgage to pay off the old one, so you're left with just one loan and one monthly payment.
