Should you refinance your mortgage with your current lender? How do you go about that? Here's what to know.
If you're looking for a new mortgage, it is possible to refinance with your current lender. Refinancing simply means paying off your existing loan and replacing it with a new one with better terms. Generally, that means a lower interest rate on your mortgage. You can also change the length of your repayment period when you refinance. For example, you could go from a 30-year mortgage to a 15-year loan and pay off your home in half the time.
To refinance with your existing mortgage lender, let your lender know you're interested in getting a new loan. Your lender tells you what information to provide to get approved for a refinance. Generally, you need to supply your lender with recent pay stubs, bank statements, and tax returns. Your lender also runs a credit check to see if your credit score has changed since you signed your original loan.
Keep in mind that your current lender may reject your mortgage refinance application. That may seem strange -- after all, they approved you for a mortgage loan in the past, and you are paying it off. But while your lender can't take your existing loan away if, for example, your credit score plunges, it can deny you a new mortgage loan.
Refinancing with your current lender has its benefits. Since you already have a relationship with that lender, if your mortgage is in good standing, your lender may be better able to offer you a lower interest rate on your refinance. Your lender might also offer you lower closing costs on your refinance, which saves you money as well.
That said, it always pays to shop around with mortgage refinancing lenders to see what offers you get. Your current mortgage lender may not be able to offer you the most competitive rate on your loan, or the lowest closing costs. Getting a few offers helps you reap the most savings in your mortgage refinancing.
In some cases, you may save money with a refinance loan from your current lender. If you're a borrower with an account in good standing (meaning you're up to date on all payments), your lender is more likely to offer you an attractive new mortgage with a low interest rate.
You may also be able to use offers from other lenders to negotiate with your current lender. For example, if your current lender offers you a great interest rate for refinancing but higher closing costs than you can get elsewhere, you can ask for lower lender fees to seal the deal. Because your lender knows you and may be motivated to keep you on as a borrower, your lender may come down on refinance closing costs.
Refinancing a mortgage could help you lower your monthly payments and save money on interest in paying off your home. And in many cases, using your current lender for your refinance makes sense. Ultimately, gathering offers is the best way to know if you're getting a good deal on a refinance.
Either way, before you agree to a refinance offer, use a mortgage calculator to see how much savings you get compared to your original loan. Make sure you're lowering your monthly payment enough to compensate for the closing costs you're charged up front.
With today's refinance rates sitting near record lows, now might be the right time to replace your existing mortgage with a new one
Absolutely. In fact, you may have an easier time refinancing with your existing lender, because you already have a relationship.
In some cases, yes. Using your current lender to refinance might result in more favorable terms on your new mortgage. But it still pays to shop around with refinance lenders and see what loan terms they offer.
In some situations, you save money if you stick with your current lender. But that isn't always the case, so shop around to find out whether you're getting a good deal from your existing lender.
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