You want to refinance, but should you refinance your mortgage with your current lender or find a new one?
Many homeowners assume that refinancing with their current lender is the best option because that lender presumably already has all of their information.
What's in this article?
And some homeowners don’t realize they even have the option to refinance with a different lender.
In this article, we’ll take a look at the benefits and drawbacks of refinancing with the same lender, so you can make the best decision for your situation.
Why do homeowners choose to refinance?
One of the most common reasons homeowners refinance is to secure a lower interest rate.
The average 30-year fixed interest rate is currently around 6%, while a year ago, it averaged nearly 8%.
By refinancing at the current rate environment, some homeowners may be able to save thousands of dollars over the life of the loan.
Other reasons to refinance include:
- Shortening or lengthening your loan term
- Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (or vice versa)
- Tapping into home equity with a cash-out refinance
Compass Mortgage offers both rate-and-term refinance and cash-out refinance options.
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Benefits of refinancing with the same lender
Are you considering contacting the same lender you used for your original mortgage?
Many borrowers choose this option for the following reasons.
Streamlined process
Your current lender should have access to the needed information from your original mortgage, and that availability could streamline the loan application and approval process.
This can result in less paperwork and fewer steps because the lender knows the terms and conditions of your current loan.
Potential for lower fees or perks
Some lenders may offer reduced or waived fees for existing customers or be more willing to negotiate with loyal clients.
They may also have loyalty programs or special perks for repeat clients.
However, not all lenders do this, so be sure to ask your current lender if they can offer you any advantages.
Drawbacks of refinancing with the same lender
While familiarity can be helpful for your refinance, the opposite can also be true.
Let’s take a look at the drawbacks of refinancing with your current lender.
Limited options
Just because your lender could offer you a more streamlined refinance process doesn’t mean they have the most competitive rates or flexible terms.
If you don’t shop around, you may pay higher interest or receive less favorable terms than you could get elsewhere.
Your current lender also may be less likely to offer perks or incentives to existing customers because they aren’t trying to win your business.
Missed opportunities
Even if your current lender seems like the most convenient option, it’s important to consider what you could be missing.
The mortgage industry is highly competitive, and that means that many lenders offer special promotions or incentives such as lower fees, rate discounts or exclusive programs.
Other lenders may also offer more suitable loan options than your current lender.
How to decide if refinancing with the same lender is right for you
Your refinance situation is unique.
If you’re considering whether to stay with your current lender or find a new one, here are some steps you can take to help you make the right decision.
1. Shop around for the best rates
Interest rates vary by lender, and even small differences can result in significant savings over the life of a mortgage loan.
Compare interest rates, loan terms and estimated costs between your lender and other lenders to find the best offer.
2. Consider the level of support and customer care
Refinancing is an important financial decision, and homeowners should feel confident that their lender will provide the support they need.
Compass Mortgage excels in customer support and care, and we provide personalized support and attention.
If you have not already acquired a loan with Compass Mortgage, you will want to look to us so you know you’re securing the best options.
3. Weigh the closing costs and fees
Closing costs can range from 2% to 6% of the loan amount.
Carefully review a lender’s closing costs, but also consider the interest rate.
Sometimes, slightly higher closing costs and fees are worth it, especially when a lower interest rate results in long-term savings.
4. Evaluate your financial health and long-term goals
What are your ultimate refinance goals?
Do they include reducing your monthly payments? Paying off your loan faster?
Consider how your lender and their loan options fit your overall financial goals.
Questions to ask before refinancing with a lender
As you evaluate your lender options, consider asking the following questions to help you clarify whether staying with your current lender or exploring other options may be more beneficial.
Will you offer better rates or terms than competitors?
One of the main goals of refinancing a mortgage is to acquire better rates or terms.
Ask the lender if they can offer competitive rates or terms with other lenders in the market.
Can you waive or reduce any fees?
Some lenders may be willing to reduce certain closing costs or fees to earn or keep your business.
Ask the lender if they can provide these reductions and weigh their offer against other lenders.
Are there penalties for paying off the loan early?
Some lenders include prepayment penalties in their loan agreements, meaning you can be charged a fee for paying off your current mortgage early through refinancing or some other method of early repayment.
Check with your lender to determine whether you will face any penalties for prepayment, and consider whether a different lender may help you offset these costs.
Start the refinance process with Compass Mortgage
Compass Mortgage is home to a better mortgage experience.
We treat our borrowers like family, with the personal attention you deserve when choosing a mortgage or refinancing your current loan.
Talk to us about personalized refinance options we can offer you. Start an application, or call us at (877) 932-8221.
We look forward to helping you find the most affordable loan for your home!