How to decide if refinancing with the same lender is right for you

Refinancing replaces your current mortgage with a new one that can save you money on interest, reduce your monthly payment, or borrow your home equity. You can refinance with any lender you like, including the one you got your existing mortgage from. If you're looking to refinance, here's a look at how to refinance a mortgage with a different lender or the same lender, and the pros and cons of each option.

Should you refinance with the same lender?

Deciding which lender to use when refinancing¹ usually comes down to the cost. If your lender is offering competitive terms and you’ve had a positive experience working with them, it makes sense to refinance with the same lender. However, it’s also a good idea to get Loan Estimates from a few different lenders so you can compare the terms and make sure you’re getting the best deal.

Before you refinance, you’ll want to review your credit and calculate your debt-to-income ratio (DTI). If your credit score has increased or your DTI has gone down, you may qualify for a lower interest rate. This can reduce your monthly payment and help you save on overall interest costs.

Pros and cons of refinancing with the same lender

Let’s look at the benefits and drawbacks of refinancing with your current lender.

Pros

• The refinancing process will be straightforward: Refinancing with your current lender can simplify the application process. Your lender already has your information, and you're familiar with working with them.
• You’re familiar with the lender: Refinancing with the same lender means you’re already familiar with its payment processes, terms, and technology.
• The lender may offer loyalty perks: Most lenders don’t want to lose customers, so they may offer discounts or incentives to keep your business.
• Refinancing options may be streamlined for government-backed loans: Certain types of government-backed loans have streamlined application processes. If you have a Federal Housing Administration, Veterans Affairs, or U.S. Department of Agriculture loan, ask your current lender about available streamlined refinance options.

Cons

• Your interest rate may not be competitive: Some lenders may reserve their best rates for new customers.
• You may have to pay high fees: Your current lender might not offer the lowest refinancing fees, which could make refinancing your loan with them more expensive than with another lender.

Pros and cons of refinancing with a different lender

Now, let's look at some of the benefits and drawbacks of refinancing with a new lender.

Pros

• You may get better rates and terms: Shopping around helps you get the best deal on your new mortgage.
• Customer service may be better: Refinancing with a different lender could lead to a better customer service experience and easier payment process than you’ve had with your current lender.
• Your closing costs could be lower: Working with a different lender could allow you to pay less in closing costs. This could save a considerable amount of money on your refinance.
• More loan options: A different lender may offer more flexible loan term lengths, different types of refinancing, and lender credit options.

Cons

• The application process could be longer: Refinancing with a different lender means you’ll have to open a new account, and the review of your financial documents starts from scratch. This means that there may be additional paperwork and verification, which could prolong the overall process.
• You don’t know how the service is long-term. When you choose a new lender, you take a risk on how the customer service experience will be.
• More coordination: You'll need to arrange to have your existing mortgage paid off and to close your account with your existing lender before you can start working with a new one.

How to refinance a mortgage with a different lender

If you’ve decided to go with a different lender, here is a step-by-step guide to refinancing.

1. Set your goal: Figure out what you want to achieve with your refinance. Do you want to lower your interest rate and monthly payment, change your term, or get cash to refinance for home improvements? Make sure the move makes sense by checking your break-even point, which is how long it takes for your savings to outweigh your costs.
2. Gather your documents: A new lender will need to verify your finances. Collect recent pay stubs, W-2s or 1099s from the past 2 years, bank statements, proof of homeowners insurance, and your current mortgage statement.
3. Shop around: Request quotes from multiple lenders. To protect your credit score, group your applications into a short rate shopping window. Multiple credit checks are treated as a single inquiry if done within a 45-day window.
4. Compare offers: All lenders provide the same Loan Estimate form, which helps you compare terms and choose the best offer. Pay close attention to the mortgage interest rate, annual percentage rate (APR), points or credits, and lender fees.
5. Apply and lock your rate: Once you find the best offer, submit a complete application with your chosen lender. If you're satisfied with your interest rate, you can pay a fee to lock it in.
6. Complete underwriting and closing: Your new lender will verify your financials and order an appraisal. You’ll keep making your normal payments to your current lender until you close on your new loan. Keep in mind the difference between a mortgage servicer and a mortgage lender. Your new lender creates the loan, but a new servicer may handle your day-to-day payments.
7. Finalize the switch: After closing, the new lender will pay off your old loan. Make sure to set up autopay for your new mortgage. Keep an eye out for an escrow refund check from your old servicer for any unused property tax and homeowners insurance funds remaining in your previous account.

Steps to take before you decide where to refinance

Here are some steps to help you decide whether to refinance with your current lender or a new one.

Talk with your current lender

Start by asking your current lender for a written Loan Estimate or an equivalent quote. Ask them directly if they can match another offer you have found. It is also a great time to ask about any loyalty discounts, lender credits, origination fees, and mortgage points they can offer to reduce your overall costs.

Do your research and shop around

Multiple quotes can help you ensure you are getting the best deal you can. Just remember to group your applications into a short time frame to minimize any effect on your credit score.

Use this short checklist to effectively compare your offers:

• Interest rate and APR
• Total closing costs
• Cash to close
• Estimated monthly payment
• Loan term length
• Whether taxes and insurance are included in the payment

The bottom line: Take your time when choosing a lender for a refinance

If you choose to refinance, you can do so with your original lender or a new lender. Taking the time to shop around could save you a significant amount of money. It's important to consider your financial goals, the cost of refinancing, and your relationship with your current lender before choosing your refinancing partner.

Are you ready to refinance? Get started on the refinance process today.