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Refinancing with current lender

Dr. Don TaylorDear Dr. Don,
What should I expect to pay to refinance a mortgage with the mortgage company I already have? Will the company negotiate and reduce some fees for an existing customer? -- Dan Do-over

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Dear Dan,
It just seems logical that it would be easier and less expensive for your existing lender to refinance your home. After all, they know your payment history, and they know the property.

The lender may not need a new property appraisal, a title search or other items that would normally be required on a new loan. They should also be willing to offer a better price because it's easier to keep a good customer than it is to find a new one.

The holy grail of refinancing is when the lender just reduces your interest rate and doesn't require you to close on a new loan. This can only happen if you are just rolling your existing balance and aren't looking for a cash-out refinancing.

So, why doesn't it happen more often? The problem is that the mortgage market is divided into three lines of business: mortgage origination, mortgage servicing and mortgage lending.

If the firm that originated your existing mortgage didn't retain the servicing, then you aren't a current customer. If the firm servicing the mortgage doesn't do originations in your market, then they may not be interested in your business.

Finally, mortgage investors are looking for packaged or securitized mortgages that are part of a pool of mortgages, so they aren't interested in your stand-alone business.

Ask your current servicing provider what cost savings they offer to current customers who refinance with them. You also need to find out what terms competing lenders offer.

Saving a few hundred dollars in closing costs doesn't mean much if you can get a lower interest rate from another lender. Shop rates on Bankrate.com before talking to your current servicing provider, so you will be able to recognize a good deal and use Bankrate's refinancing calculator to determine your refinancing savings.

This mortgage comparison worksheet from the FTC can help decide between lenders.

If you are going to apply at several lenders, you should do it within a 30-day period. Your credit score won't be hurt by comparison shopping for a mortgage if you concentrate your applications within this time frame.

That's because Fair Isaac & Co. Inc. (the company that works with the credit reporting agencies to provide your credit score to lenders) considers these multiple mortgage inquiries as one inquiry when calculating your credit score.

 
-- Updated: Sept. 17, 2003
   

 

 
 

 

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