Should You Refinance With The Same Lender?

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, including:

• Interest rates: 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.
• Closing costs: Refinancing also means paying a new set of closing costs. Again, if cost is your top priority, it’s worth getting offers from multiple lenders to see what they charge (versus what your current lender charges). In some cases, your lender may be willing to negotiate, waive some fees or match a competitor’s lower rates.
• Satisfaction with your current lender: Think back on your experience with your lender. Were you happy with the customer service? How about its digital tools and accessibility? If not, it might be time for a change. As part of your research, look up lender reviews and customer testimonials for other lenders you’re considering. You can also call or chat with customer service representatives from other lenders to get a sense of how customers are treated and how easy it is to get in touch with a rep at each company.
• The goal of your refinance: Your current lender may or may not be able to provide what you’re looking for, depending on the reason for your refinance. Whether you’re hoping for a lower rate, a new repayment term or a different loan type, make sure the lender you choose can help you achieve that specific goal.

Advantages of refinancing with the same lender

• Ease of application: If you refinance with the same lender, they’ll already have some of your information (including your payment history) on file. You’ll have to submit updated documentation about your current financial situation, but working with a familiar lender may make the process easier.
• Convenient payment: When it’s time to pay your mortgage, you can follow the same process. You’ll avoid the hassle of setting up a new online account, learning how to make your monthly payment and figuring out how to manage your account.
• 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. Not only is that convenient, but your loyalty could also help you earn discounts or give you negotiating power in the future.

Disadvantages of refinancing with the same lender

• Might not get the best rate: Your current lender isn’t guaranteed to offer the best refinance rates. If you don’t shop around, you might miss out on a more competitive rate elsewhere.
• Fees could be higher: Similarly, your lender might charge steeper closing costs than some of its competitors. Checking other lenders’ fees will ensure you get the best deal — and don’t spend more money than necessary on your refinance.
• Could miss out on better loan terms: Like rates and fees, your current lender might not offer the best loan terms for your financial situation and goals. The only way to find out is by exploring options from other lenders before committing to one.

Talk with your current lender

In addition to checking out other lenders’ offerings, speak with your current lender and see what it’s willing to do to keep your business. In some cases, your lender may be open to negotiating or providing a discount, especially if you’ve found a more competitive deal elsewhere.

“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.”

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.

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 refinance with your current lender

If you’re ready to get the ball rolling on your refinance, here’s how to remortgage with the same lender:

1. Apply for a refinance: You’ll work with your lender to provide employment-related documentation (such as pay stubs, W-2s, and tax returns), bank statements, a copy of your homeowners insurance policy and your latest mortgage statement.
2. Review your loan estimate: Make sure the rate, term and closing costs are in line with your expectations.
3. Get an appraisal: If you’re approved, the next step is getting an appraisal to determine your home’s current market value.
4. Close: After the appraisal, the lender’s underwriting department will review the loan. If everything looks good, you’ll close on the refinance.

Learn more: How to get the best refinance rate on your mortgage

FAQs

• How much are closing costs on a refinance with the same lender?
  

  When refinancing, you’ll pay between 2 percent and 6 percent of the new loan amount in closing costs. If you refinance with the same lender, they might offer a discount or fee waiver to reduce these costs.

• Do lenders offer lower refinance rates for existing customers?
  

  In some cases, yes — but it’s not guaranteed. You could get a discount for being an existing customer, but just because you have a relationship with a lender doesn’t mean it’ll offer the best possible rates for your refinance. That’s why it’s smart to shop around and compare offers from at least three lenders before refinancing.

• What documents are required to refinance with the same lender?
  

  Even if you refinance with the same lender, it’ll request many of the same documents you submitted to get your primary mortgage. This might include recent pay stubs, W-2s, federal tax returns and bank statements. You may also need to provide your current mortgage statement and homeowners insurance information.