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Refinancing your loan can be just as overwhelming as when you first took out a mortgage. You have many options, including refinancing with your current mortgage lender. But should you?
There are some benefits to sticking with your current lender, but it’s not always the right choice.
Here’s what you must know.
Can You Refinance with Your Current Lender?
While you can refinance with your current lender, it shouldn’t be your only option. No matter who you refinance with, you must prove you qualify. You must prove your income, assets, credit history, and home value.
Lenders like to keep their current customers, so they may hit you with ‘the best offer,’ but often, it’s not as low as you could get elsewhere, and you’ll only know if you shop around.
>> More: How to Refinance Your Mortgage
Is It Cheaper to Refinance with Your Current Lender?
Sometimes your current lender is cheaper, but not always. Because they already have your business, they likely won’t give you the lowest rates or best terms available.
They’ll give you something better than you have currently, but it may not be the lowest option available today.
But, if you’re a great borrower with a spotless payment history, you may get lucky and get the best offers from your current lender.
New online mortgage lenders often try to entice new customers. They’ll often have slightly better rates or terms to earn your business. But this isn’t a hard and fast rule.
Some borrowers may find their current lender offers the best rates and others find that shopping around yields better rates.
Why You Should Shop Around for a New Mortgage Refinance Lender
#1. Lower Closing Costs
Each lender charges different mortgage closing costs. When you shop around, you may find one lender charges less than another.
Because your current lender already has your business, they may not give you the best closing costs because you are already a borrower.
New lenders, however, may entice you with lower closing costs to get your business. Lenders make money on the interest they charge, so luring you in with lower closing costs is a great way for them to earn the business. Additionally, you can also negotiate closing costs. Most people do not realize this is a viable option, so if you want to stay with your current mortgage lender then give this strategy a shot.
#2. Better Interest Rates
Every lender also charges different interest rates. Don’t assume your lender offers the best rate available.
Remember, they already have your business, so they may quote you a lower rate than you have now, but lower rates may be available.
#3. Quick & Easy Online Process
Most lenders today make it easy to apply for a mortgage. You can apply online and get an answer almost instantly. Fortunately, technology and the internet make comparison shopping wildly easy. With a few mouse clicks and minimal information, you can view real rates from various lenders all vying for your business.
#4. Better Customer Service
When you shop for a mortgage, don’t focus on costs alone. Customer service plays a big role in your loan. Remember, you could have the loan for as long as 30 years.
While your loan may get sold throughout that time, in the beginning, you’ll likely deal with the lender you use to secure the loan.
Pay close attention to how they treat you during the application process and read reviews about their customer service.
Advantages of Refinancing the Your Current Mortgage Lender
- Streamlined process – Your current lender already knows you. They know your mortgage payment history, and they have your income/asset information. While you must update your information with the most current data, the current lender has to do less work so you may close faster.
- Sometimes lower closing costs – Some lenders offer a streamlined (lower cost) process for current borrowers. For example, they may allow an exterior-only appraisal versus a full appraisal, which can save you $200 or more. They may also cut you a deal on the lender costs because you’re already a borrower, and there’s less administrative work for them to do.
- You may get a multi-account discount – If you have a banking relationship with your current lender, you may get a lower rate. Lenders offer this for borrowers with more than one loan with them or even with deposit accounts.
- You know the lender – Getting used to a new lender can be a hassle. If you’re happy with the customer service your current lender offers and you are familiar with their programs, you may want to stay with them just for the simplicity it offers.
Disadvantages of Refinance through Your Current Mortgage Lender
- Miss out on lower rates – If you don’t shop around and see what other lenders offer, you may pay a higher rate than is necessary. Your current lender may offer a rate better than you have, but it may not be the best you can get.
- Verifying your qualifying factors again – Some lenders make you re-qualify for a mortgage loan even if you’re already a customer. If you have to go through the entire process again, you might as well shop around.
- Poor customer service – The lender’s customer service won’t change just because you get a new loan. If they already have poor customer service, you’d be buying into the same bad service with a new loan.
How to Negotiate a Refinance Offer
When you apply to refinance, you can negotiate your rate and terms. To do this, use these steps:
#1. Check your credit and other qualifying factors
Put yourself in a good position to negotiate. If you have derogatory credit or a high debt-to-income ratio, lenders won’t negotiate with you.
Instead, fix any credit issues and pay your debts down. When you go to the lender with your best foot forward, they’ll have reason to listen to your negotiations.
#2. Have multiple quotes available
Before you negotiate, have quotes from other lenders available too. Choose the best offer and the best mortgage lender.
They may not be the same. Go to the lender who you think offers the best customer service and ask them to match another lender’s offer.
#3. Ask lenders to waive certain closing fees
The easiest fees to ask lenders to waive are the home appraisal fee and mortgage origination fee on a refinance. If your last appraisal wasn’t that long ago, the lender may agree to a drive-by appraisal or even a desktop appraisal (even cheaper).
If you have good credit and prove to be a good borrower, they may even agree to waive the origination fee.
#4. Ask to bring in your own appraisal or title services
If you have connections and know an appraiser or title company that charges less than the lender’s services, ask if you can use your providers instead.
How to Get the Best Mortgage Rate with Your Current Lender
If you want to stick with your current lender, you should still negotiate. Here’s how.
- Get quotes from other lenders: Show your current lender you’re shopping around, and other lenders will offer a better rate and/or costs. Provide your lender with a copy of the Loan Estimate that each lender sends you within 3 business days of applying.
- Plead your case: If you have a perfect payment history or have other loans/accounts with the financial institution, use that to your advantage when asking for lower rates.
- Don’t settle: If your lender won’t budge and you know there are better offers available, go elsewhere. Sometimes lenders will change their mind at the last minute when they realize you aren’t taking their offer.
Is it Quicker to Refinance with Current Lender or to Shop Around?
It’s a toss-up whether it’s quicker to refinance with your current lender or shop around. You’ll complete a loan application and provide qualifying documentation in both cases.
Some lenders operate lightning-fast, with an online process and almost instant answers. Others take longer, which may give your current lender the edge since they already have most of your information.
It’s not about speed, though – it’s about who will help you save the most money over the life of your loan.
Bottom Line: Can You Refinance with Your Current Mortgage Lender?
While you can refinance with your current lender, it’s not always in your best interest. To decide, shop around and get at least 3 quotes from different lenders.
Compare the loan programs, rates, and fees available to you and choose the program that fits the best.