refinance

Should I refinance through my current lender?

Don TaylorDear Dr. Don,
I want to refinance my home. Would it be better to go through my current mortgage company or through another company?

Thanks,
-- J.W. Winnow

Dear J.W.,
In a world where the loan originator typically isn't the loan servicer, and the loan servicer doesn't actually own the home loan, it's harder to make the argument that sticking with your current lender gives you much of an advantage when you refinance. Is your current company your loan servicer, or was it just the loan originator?

Often, your originating lender or loan servicer won't offer the best loan rate but may be able to offer you lower closing costs because of the existing relationship. You have to compare the loans to decide which is likely to provide you with the lowest total interest expense and closing costs. Bankrate's refinancing calculators can help you compare the offers. The U.S. Department of Housing and Urban Development also has a pamphlet, "Looking for the Best Mortgage," that has a "Mortgage Shopping Worksheet," which can help when comparing loans.

The other thing to be cautious about in comparison shopping for a new home loan is that you don't want it to negatively impact your credit score. Don't string out the credit application process. If you apply with several lenders in a short period of time, say two weeks, then it's obvious that you're comparison shopping. Do it over a month's time, and your credit score is likely to take a bigger hit because of the multiple refinance loan applications.

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