Refinancing with the same lender: Is it a good idea?

When refinancing your mortgage loan, can you refinance with the same lender? It’s important to consider both options to make sure you’re getting the best deal possible on your new loan. While refinancing with the same lender has its advantages, there also are benefits to working with a new lender.

Should you refinance with the same lender?

Before you refinance, you’ll want to review your credit score and calculate your debt-to-income ratio (DTI). If your credit score has increased or your DTI ratio has gone down, you may qualify for better terms.

Deciding which mortgage lender to use usually comes down to the cost to refinance. You’ll want to estimate the cost of refinancing over your loan term with multiple lenders and compare the results.

Pros and cons of refinancing with the same lender

If you’re thinking about refinancing your mortgage with the same lender, it’s worth giving some thought to the following advantages and disadvantages of choosing this path.

Pros

• The refinancing process will be more straightforward: The lender will be familiar with you and your finances, having previously approved you for a mortgage. Such customer loyalty benefits can streamline the application process.
• You’re familiar with the lender: Refinancing with the same lender means you’re already up to speed on the payment process, terms, and technology. Learning a new process can be frustrating and take extra time.
• The lender may offer you special perks: Most lenders don’t want to lose customers, so they may offer discounts or incentives with a refinance to keep your business.
• Refinancing options may be streamlined for government-backed loans: Certain types of government loans have a streamlined application process. 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 save their best interest rates for new customers. That means that they may not offer current customers the best rates when refinancing, or you may have to engage in some interest rate negotiation.
• You could be subject to high fees: It’s possible that your current lender might not offer the lowest refinancing fees, which could make refinancing your loan with them more expensive than it would be with another lender.

Pros and cons of refinancing with a different lender

Refinancing with a different lender comes with both advantages and disadvantages worth weighing.

Pros

• You may get better rates and terms: Shopping around for a different lender and ultimately choosing the best offer 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, including an 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 you a lot of money on your refinance.

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 will 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, it’s impossible to know how good they’ll be to work with over the long term.

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

Since refinancing with the same lender is a little different for every borrower, deciding whether to stick with your current lender or change mortgage lenders will depend on your personal situation. However, you can take a couple of key steps to determine if refinancing with the same lender is right for you.

Talk with your current lender

Take the time to speak with your current mortgage lender about the refinancing options they offer. Ask about refinancing costs, your future monthly payment, and the interest rate they can offer. Gather all this information so you can compare the cost with other lenders’ offers before deciding.

Do your research and shop around

It’s important to shop around when considering a refinance. It may make the most sense to stay with your current lender, but it never hurts to do your research and look for a better lender — especially if your goal in refinancing is to save money.

Talk with other lenders and gather all the information you need to compare those lenders with your current lender. Take note of each lender’s reputation, terms, payment system, upfront costs, interest rates, and any other incentives or drawbacks.

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

Refinancing with the same lender may or may not work for you and your specific financial situation. Before you decide whether to take your business elsewhere, it’s important to compare offers to find the best deal for refinancing your loan. Talk with your current lender about your refinancing plans to see what they can offer you. You can then determine if another lender would be a better fit.

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