Should You Refinance with Your Current Lender?

Whether you aim to lower your monthly payment with a better interest rate, get cash out for an important project, or speed up the payoff period by redefining the terms of your mortgage, refinancing can be a great way to accomplish your home finance goals. But the question arises: Is it better to refinance with your current lender or a new lender?

As with most financial questions, the answer depends on your unique situation and what you may be trying to accomplish. So, take a look at the pros and cons of refinancing with your current lender and see what you think. We will also outline some important questions you should ask yourself to help make the decision.

Benefits of refinancing with your current lender

Refinancing with the same lender you initially connected with for your mortgage does come with certain advantages. For one, you already have a relationship with this organization. And whether it was their fair rates, dedicated service, or some other engaging perks, they won you over once already. If you are still enjoying the benefits from that initial decision, it can be hard to walk away.

Additionally, the process should be relatively quick and easy—your current lender should already have all of your information on file. That should mean less paperwork, less time spent, and less effort overall. The value of time saved should not be overlooked.

It is also important to consider your broader financial partnerships. If you already have a savings, checking, credit card, or other account with your mortgage lender, it can be valuable to keep your refinanced account with them as well. All of your financial information is in one place for easy access, service, and communication. It also means your lender might have a more comprehensive view of your financial situation and be able to offer custom-tailored solutions just for you.

Sticking with your current lender will also make it easier for you to pay and access your bills, since you are already acquainted with the way they do things. You will not need to relearn a new system or, in many cases, even update your online portal login credentials. Again, this will save you time and effort.

Drawbacks of refinancing with your current lender

When it comes time to decide on which lender to refinance with, one factor may contribute to the discussion more than any other: interest rates.

Though there are many reasons to refinance, from getting cash out to dispensing with mortgage insurance, many homeowners choose to do so exclusively for a lower monthly payment. If they bought their house when interest rates were up, and now the rates are even marginally lower, it is possible to save thousands over the life of a loan by refinancing. That means it might be worth prioritizing those savings above all else.

Your current lender may not offer the lowest possible rate, and there is no way to know for sure without checking. So, many homeowners naturally look beyond their own lender when considering a refinance. The pursuit of a better rate is one of the most common reasons to refinance with someone else.

There are other reasons to forge fresh financial relationships, too. Perhaps your new lender specializes in assisting homeowners like you. Veterans or new homeowners, for example, may benefit from having experts in VA or FHA loans in the fold. Or, maybe your new lender operates out of a brick-and-mortar location in your neighborhood that will make interactions easier—or maybe they offer a better online portal that will benefit an on-the-go homeowner. Personal preference always plays a role, so dive deep into the details of any financial organization before making the decision.

In fact, one of the chief reasons a homeowner might choose to refinance with a new partner is the overall experience. If you have a hard time getting in touch with your lender or paying a bill, it can put a damper on everything else. Nobody likes being treated like a number, and nobody likes dealing with complicated processes and bad attitudes. So, while it is rare to leave a lender just because of a poor experience, there is no denying that these things can (and do) have an effect on your experience.

Questions to ask before deciding to refinance with your current lender

We will leave you with some mental exercises to perform if you are on the fence between refinancing with your current lender and investigating a new financial partner. Hopefully they make deciding a little easier.

What do you like about your current lender? Do they have a good mobile app? Are their loan advisors helpful and kind? Make a list of all of the things they are doing right. And then ask: What do you dislike about your current lender? Do they have odd hours on the weekends? Do you feel like you are spending too much? Are they sending way too many emails? Too few? Make sure to capture every major headache and minor inconvenience. Asking all of these questions will help give you a good baseline on how you feel about your current lender. If the negatives outweigh the positives, the choice to move on should be easy.

Next, ask yourself some questions about value. How much exactly are you looking to save each month? How much energy are you willing to expend to earn those savings? Are you willing to fill out three online forms for the chance of saving $150 each month? What about six online forms? What about twenty? Run the numbers to set some parameters on risk and reward before you start spending the time and effort looking for a lower rate. You want to make sure you have a clear goal in mind and know how much you are comfortable investing in pursuing it.

Finally, take a look at all of your answers together. Are you willing to put in the time and energy you have defined, even if it means losing some of the positive elements of your current lender relationship? Do the risk seem worth taking? No advisor can answer these questions for you—it is a deeply personal decision. However, the good news is this is not an undoable action. Even if you switch lenders to a lower rate tomorrow, it is possible to switch back again later on. Who knows? Their rates might be even lower next year.