Refinancing a loan with the same lender can save you time and may require less paperwork.
But is it a good idea?
This article takes a look at the pros and cons of refinancing with your current lender and how you can ensure you get the best deal.
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Can You Refinance with the Same Lender?
Yes. Usually, when you refinance with the same lender, the process is a little quicker, requires less paperwork, and in some cases, can save you money on closing costs.
But, you shouldn’t blindly refinance your loan or get a second loan with the same lender without speaking with other companies and getting loan quotes. Interest rates and loan terms will vary by lender, so by getting loan quotes from 3-4 lenders, you can ensure you’re getting competitive pricing.
Advantages of Refinancing with the Same Lender
Benefits of working with your current lender include:
- Lower closing costs – Your current lender may be willing to give you a deal on closing costs to keep your business.
- Quicker process – When you refinance your loan with your current lender, the process is usually quicker. They have all of your information on file, so you won’t have to dig through files to find your documents.
Why You Shouldn’t Refinance with the Same Lender
Many people make the mistake of refinancing with the same lender without comparing loan offers with other lenders first, thinking it’s the easiest way to get a lower rate. The problem with this is that your current lender knows the rate.you have so they will provide you with a lower rate, but not necessarily the best rate. Interest rates, closing costs, and other lender fees vary by lender, so when you refinance your loan with the same lender without speaking to other companies, you’re leaving money on the table.
When you are talking about a mortgage loan with a balance of hundreds of thousands of dollars, even just a half a percent difference in the interest rate can add up to tens of thousands of dollars over the course of the loan.
Even if you really like your lender and want to stay with them, you should still get loan estimates from at least two other lenders to help you negotiate better terms with your current lender.
Tips to Negotiating the Best Terms when Refinancing
Tell your current lender you are shopping around – If your lender thinks they are negotiating with themselves and you’re not speaking to any other lenders they have no incentive to give you any breaks on the interest rate, or lower their lender fees. You should inform your current lender that you are speaking to other lenders so they come to you with a competitive offer.
Get loan offers from 3-4 different lenders – The most important thing you can do when refinancing a loan is to get a loan estimate from at least 3 different lenders. You can use the loan estimates to further negotiate to get even more favorable loan terms.
Use the APR to compare loan offers – When comparing different loan quotes with different interest rates and loan terms it can be difficult to know which one is the best deal. The annual percentage rate includes all loan-related costs to give you the true cost of a loan making it simple to compare loan quotes.
Maximize your credit score – The interest rate on a loan is dependent largely on your credit rating. The higher your credit score, is lower the rate you will receive. So before filling out a refinance application take the necessary steps to ensure your credit score is as high as possible.