Should You Refinance With the Same Lender?

Quick Answer

When refinancing your mortgage loan, you can stick with the same lender or switch to a new one. It can potentially help you get a better deal, but the process can take longer compared to remaining with the same lender.

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Refinancing your mortgage loan can provide a lot of benefits, but you may be wondering whether it's better to do it with the same lender or switch to a different one.

Changing lenders could potentially help you secure a lower interest rate, and you could also enjoy better customer service if your experience with your existing lender has been subpar. But switching lenders may cause the refinance process to take longer, and it's still worth it to check with your current lender to see if they'll provide any incentives to keep your business.

Benefits of Switching Lenders When You Refinance

Refinancing your home loan with another lender could have several advantages. Here's what to keep in mind.

You May Get a Better Interest Rate

Shopping around is one of the best ways to make sure you're getting the best interest rate on your new loan, and if you stick with your current lender who knows what your current rate is, you might get a lower rate but not the best out there.

It's especially a good idea to shop around if your credit score or debt-to-income ratio has improved since you first took out the loan.

You Could Pay Less in Closing Costs

Comparing multiple offers can also make it easier to find the lowest upfront costs associated with your mortgage refinance. Each lender has its own approach to closing costs, and some lenders don't charge these costs at all.

You May Enjoy Better Service

If you've had a bad experience with your current lender, switching to a new one with a better track record for customer experience could be the right move. It could even make sense to switch to another lender that offers a more streamlined application process, so you have to do less work upfront.

Downsides of Switching Lenders When You Refinance

While changing lenders can provide you some savings and potentially a better experience, there are also some disadvantages to consider before you make a switch.

It Can Lengthen the Refinance Process

Your current lender already has a lot of your information on file, and sticking with them can help speed up the closing process. This may be particularly helpful if you're considering a cash-out refinance and want to close as soon as possible.

With that said, you'll still need to resubmit all of your documents even if you stick with your current lender because their decision is based on your current situation, not your situation when you first took out the loan.

Your Current Lender Could Offer Incentives

Depending on the lender and your situation, the incentives your existing lender offers may be enough to make it worthwhile to stay. As you shop around, share the best offer you receive with your current lender to see if it's willing to match or even beat what you can find elsewhere.

It Could Complicate Your Finances

If you have a mortgage loan through the same bank or credit union that you use for banking and other financial services, it could make sense to keep the lender for the sake of convenience and simplicity. Switching mortgage lenders means creating a new online account, setting up new payments and more.

Should You Refinance With the Same Lender?

The decision of whether to refinance with your existing mortgage lender or to switch to a new one depends largely on two factors: the numbers and your preferences.

If your current lender offers the best deal or is willing to match the best deal you find with another financial institution, the refinancing process could be easier and you won't lose any money by staying. It could also make your life a bit easier in the long run to keep the same lender.

However, if you'd miss out on savings by sticking with the same lender, it might not make sense to stay, even if you have other financial accounts with the financial institution. Even a slight difference in your interest rate with another lender could save you tens of thousands of dollars over the life of the loan.

As with any other financial decision, take your time to research all of your options and make the decision that makes the most sense to you.

Build Your Credit Before Applying to Refinance

Before you refinance your mortgage loan, it's a good idea to check your credit score and credit report to get an idea of where you stand, and to determine whether you need to take steps to improve your credit before you submit your application.

If you need to do some work to get your credit profile to where you want it to be, that can delay the process, but again, if it can help you qualify for a lower interest rate, your effort will pay off big time in the long run.