One of the biggest questions for any refinancing applicant is who to refinance with. As with just about any finance product, it’s important to shop around and understand your own goals to find the right lender.
If you’re thinking of refinancing — and who isn’t with rates at or near record lows — it’s a good idea to check with your current mortgage lender to see what they can offer.
Keep in mind: Your mortgage lender is the institution that originated your loan, and that may be different from the current servicer. Some mortgage administrators, the folks you send your monthly check to, don’t originate their own loans, so you’ll want to make sure you’re talking to the right kind of institution. If your mortgage is currently held by a bank or company that originates loans, however, they may be able and perhaps even eager to extend a competitive rate or terms on a refinance, even if another lender originated the loan.
It’s less complicated than it sounds. Here are the basics of refinancing with your current lender, and a few things to keep in mind for any refinance.
The right refinance deal depends on your goals
If you’re just looking for the lowest rate, and that’s all you care about, shopping around as widely as you have patience for is the key thing to do. Find the best rate and terms and see if your current lender will match it, but be prepared to go somewhere else if cost is your number one priority.
“Most lenders want to keep their customers, most lenders want to preserve that relationship,” said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association. “They want to keep the servicing of the loan, they want to keep the customer really.”
That means your current lender may be willing to match lower rates offered by a competitor. 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.
Other benefits to staying put with your lender
Even if your current lender doesn’t offer you the lowest rate on a refi, there could be other reasons to stay.
“It is usually easier to refinance with the same lender; they have your information, they have a lot of the borrower’s history, payment history, income, etc., on file,” Kan said.
Also, he pointed out, if your mortgage is underwritten by a full-service bank, your personal finances may be more efficient if they’re all under one roof.
“For banks which have a variety of product offerings — credit cards, consumer loans, bank accounts, etc. — there is also that incentive for people to stay with their current lender,” Kan said. “Personally I have a few accounts that I have consolidated with a bank and it’s really easy. I have an app where I can see my checking and savings and mortgage all in one place. It’s really easy if a bank is your current holder.”
Capacity issues at lenders
Whether you want to stay put or switch mortgage lenders, another consideration is whether your loan will be processed efficiently.
The current low interest rate environment has led to a refinancing boom, and that means many borrowers are experiencing delays getting to closing.
“Can the lender or any lender take more applications, and how quickly could they close on them?” Kan said. That’s part of what you need to consider as you shop around for the best refinance package. “You’d have to find a lender with the capacity to do it and the right rate offering or product offering.”
That could be another reason to stick with a lender that already has a better grasp of your financial track record.
“It’s about communication with the lender, getting your documentation ready,” Kan said. “With such full pipelines, every bit of time you’ll save will help both on your end and the lender’s end to get the loan closed.”
Now can be a great time to refinance, and there can be some benefits to sticking with your current lender. Perhaps your lender will waive some of the costs of refinancing to keep you as a customer.
Even if staying put is your preference, it’s a good idea to shop around anyway, and see if you can prod your mortgage holder to give you a better rate by presenting some competitive offers.
Some lenders even have customer retention specialists on staff who may be able to help you get a better deal.