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
Do you need an appraisal to refinance with the same lender? ›
You'll typically need a home appraisal to refinance your mortgage, both to confirm your home's value and to set your new loan amount. If your refinance appraisal comes in too low, though, you may not be able to refinance unless you use a streamline (no-appraisal) refinance program.
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.
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 there a downside to refinancing multiple times? ›
Cost of refinancing multiple times
Each time you refinance, you'll have to pay fees, such as for the application, appraisal, credit check, attorney and title search. These can vary depending on your area and the lender, though it's common to pay anywhere from 2 percent to 5 percent of the loan principal.
What happens if the appraisal is lower than the offer? ›
If you've made an offer on a home and your lender's appraisal values the property at less than you've bid, the lender won't approve the full mortgage amount even if you qualify for it. In order for the purchase to go through, you may need to supply extra cash.
Can a refinance be denied after appraisal? ›
Can a refinance be denied after the 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.
What should you not do when refinancing? ›
Refinancing too often or leveraging too much home equity
Avoid making the mistake of refinancing excessively to land a low interest rate. The charges to refinance repeatedly could add up over time, negating the benefits. Be wary of also leveraging home equity too often.
How low will interest rates go in 2024? ›
Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.
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.
Refinance closing costs commonly run between 2% and 6% of the loan principal. For example, if you're refinancing a $225,000 mortgage balance, you can expect to pay between $4,500 and $13,500. Like purchase loans, mortgage refinancing carries standard fees, such as origination fees and multiple third-party charges.
Do you have to pay closing costs when you refinance? ›
When you refinance, you are required to pay closing costs like those you paid when you initially purchased your home. The average closing costs on a refinance are approximately $5,000, but the size of your loan and the state and county where you live will play big roles in how much you pay.
How much equity do you need to refinance? ›
Lenders often want applicants to have at least 20 percent equity before they consider refinancing a loan.
What are interest rates today? ›
Current mortgage and refinance rates
| Product | Interest Rate | APR |
|---|
| 30-year fixed-rate | 7.262% | 7.344% |
| 20-year fixed-rate | 7.055% | 7.157% |
| 15-year fixed-rate | 6.387% | 6.518% |
| 10-year fixed-rate | 6.156% | 6.343% |
5 more rowsCan 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.
Who pays for an appraisal when refinancing? ›
As a real estate appraiser in California, I often hear this question, and the answer is almost always the same. It's the client who pays for the home appraisal.
How long does it take to refinance with the same lender? ›
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®”.
How much does a refinance appraisal cost? ›
A homeowner who plans to refinance a mortgage must first get an appraisal, which typically costs $300 to $500 for a single-family home. The appraiser is an independent professional who thoroughly evaluates the home and examines similar properties before arriving at a valuation.
