Should you refinance with your current mortgage lender?

Posted by  on Mar 27, 2012

If your credit is good and there's still a decent amount of equity in your home, you are probably thinking about refinancing. Should you stick with your current lender or look for a new one? Here are some possible benefits to consider about refinancing with the same mortgage lender.

1. You know what to expect

It may be comforting to refinance with a familiar mortgage lender. If you've been with the same lender for many years and have been satisfied with the customer service, you may be tempted to just stick with it without seeking out other options.

However, it always pays to do some research to compare mortgage rates from several lenders. That way you can be confident you have found the best deal possible and haven't left money on the table just to keep things the same.

2. Not as much red tape

All mortgage lenders are super cautious about extending credit to borrowers today. Don't be surprised if you have to jump through more hoops than a dog at a circus to prove that you are a good credit risk. By refinancing with your current mortgage lender, however, you may be able to sidestep some of the scrutiny you'd undergo with other lenders. Yes, your current lender will review your credit history and assets but may be more willing to overlook some weaknesses in your profile if you have a strong history of on-time payments on your mortgage loan and no other problems.

3. Not as much cash out of pocket

Using your mortgage lender also might mean that you can just roll over any money in escrow to use for taxes and insurance. If you refinance with a new mortgage lender, you'll likely need to provide proof that you have a homeowners insurance policy that is paid up for a whole year, as well as cash at closing to put toward property taxes.

4. Waive the prepayment penalty

Continuing to do business with the same mortgage lender also could help you avoid a prepayment penalty if there is one for your current mortgage. Some mortgage lenders charge a fee for paying off a loan early, but you might be able to get that fee waived for keeping your loan at the same institution.

Why it still pays to shop around

Your ability to refinance with your mortgage lender is obviously going to depend upon how reliable you have been as a customer. If you have frequently been late with payments or have fallen behind, it may be tough to convince your lender to give you a new loan. On the other hand, if you've already received quotes from several places, your mortgage lender may be willing to offer you a deal rather than lose your business.


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