You decided you want to refinance. It’s time to lower your payment or tap into your home’s equity. You’ve prepared yourself financially and are ready to take the jump. Your current lender seems to have a great program for you. Before you jump in headfirst, you may want to consider the top reasons not to use your current lender though.
You May Not Get the Best Deal
You probably want to refinance to get a better deal on your mortgage. Your current lender may offer you a rate/term that is better than what you have now, but not the lowest available? Why would they do that? It’s because they already have your business. They don’t have to lure you in with a great rate. They know what you have now and their new rate beats that, so they think you should take it.
If you go out and shop around, you’ll likely find that other lenders offer better rates/terms. Sometimes they don’t, but most of the time, the better rates/terms are outside of your current lender. One thing you can do after shopping around is show your lender the other offers you received. They may be willing to meet or beat the offer in an effort to keep your business. If they don’t, though, you should take the better offers that other lenders have for you.
You Still Have to go Through the Application Process
Just because you have a loan with your lender now doesn’t mean you don’t have to go through the same application process you would go through elsewhere. If you have to put the effort in to apply for the loan, why not do it elsewhere too?
It might be a different story if your current lender could just take your loan and refinance it without having to do any underwriting or validating of your information. But since you have to provide your paystubs, W-2s, tax returns, and asset statements, it makes sense to do apply with other lenders at the same time to see who has the best offer for you.
You May Get a Higher Rate Than Necessary
If you caused your current lender any type of stress, they could take it out on the new rate they offer. For example, if they know that you tend to make your payments 10 days late every month or that you always have customer service issues, they may quote you a higher rate just to get rid of you. Even though lenders are out to make money, they want borrowers that are easy and pay their bills on time. If you don’t shop around you won’t have anything to compare it to, so you won’t know if you are getting the best rate available today or not.
You’ll Pay Closing Fees With Any Lender
Your current lender is going to have to charge you some closing fees. They may be able to cut back on the processing/underwriting fee if they can use some of your information that they already have, but there will still be closing costs.
Again, if you don’t shop around, you won’t know what other lenders have to offer. Some lenders may offer a no closing cost loan for a rate that is close to what your current lender offers. You’d make out better if you took the no closing cost loan, in this case.
You need to shop around to see what lenders have to offer. Just sticking with your current lender might feel safe and as if you’ll get an approval. There’s no guarantee that you will get that approval, even with your current lender. Why not see what else is out there and compare the offers to make sure you are making the right financial decision?Click to See the Latest Mortgage Rates»