Refinancing your loan can be a great way to save money, but it's important to consider all of your options before making a decision. You can usually refinance with the same lender you originally obtained a loan with, but it's not always the best option. It's important to understand the advantages and disadvantages of refinancing with your current lender, as well as the other options available to you. Your lender knows how much interest you are currently paying on your loan, which means they can offer you a slightly lower interest rate for your refinance without actually having to compete with other lenders.
However, keep in mind that the mortgage lender is the institution that originated your loan and may be different from the current servicing entity. Some mortgage servicers, the people you send your monthly check to, don't originate their own loans, so you'll want to make sure you're talking to the right type of institution. Refinancing with your current lender does have some advantages. Freeborn says Discover Home Loans keeps existing information on file for previous loans that its customers applied for.
This can move the refinancing process forward at a faster pace. But it's important to remember that refinancing should take just as much effort, regardless of the lender you use. Documentation and qualification requirements are largely based on the type of loan you are using, not on the lender. Yes, you can refinance a personal loan with the same bank, but not all banks allow you to do so.
If you can get a lower interest rate than your original loan, there are minimal fees, and you can't get a better offer from another bank, then it makes sense to refinance the loan with the same bank. A home loan is one of the most economical ways to borrow money. According to WalletHub, the average credit card has an interest rate that is more than 14% higher than the average 15-year mortgage rate. This means that if you have a significant amount of high-interest debt, you can save money by consolidating what you owe with a cashback refinance.
As a general rule, you must live in your home for at least one year after refinancing to gain a financial advantage through refinancing. Conventional wisdom says you'll need 20% to refinance with a conventional loan, but in fact, you'll only need 20% if you want to avoid paying for mortgage insurance or plan to refinance with cash withdrawal. If you're thinking of refinancing to take advantage of your home equity or changing the terms of your loan, it's a good idea to check with your current mortgage lender to see what they can offer you. Still, it's a good idea to go both ways at once: pre-qualify for some refinancing options and then mentioning your rates when negotiating.
For example, homeowners who currently have a government-backed loan generally find it better to use a simplified refinance from the FHA, VA, or USDA. You need an interest rate low enough that your monthly savings allow you to quickly recover the closing costs associated with refinancing. If you have lower credit or a higher loan-to-value ratio, you may need to refinance with a lender that can offer more flexible requirements than the current one. You can refinance to change your interest rate or mortgage term, consolidate your debt or withdraw cash from your equity. Mortgage professionals often recommend avoiding anything that affects your debt, income, or credit during the weeks or even months when your refinance request is being evaluated.
You can also use a refinance calculator to get an idea of loan options, as well as how a refinance could change your monthly payment. The greater the difference between your base rate and your APR, the more you'll pay in closing costs when you finish your refinance. When looking to refinance, remember that your lender or loan servicer knows your current interest rate. You're not required to refinance with your original lender, but whether it makes sense to switch to a different one depends on your priorities, as well as the rate and conditions you can qualify for with a new lender. However, some homeowners whose homes have fallen in value since the date of purchase may find that they will have to pay PMI for the first time if they refinance their mortgage. When you refinance, you use a new loan or line of credit with a lower interest rate to pay off the old loan, so you owe the old balance to the new lender. In conclusion, it is possible to refinance with the same bank if it makes sense for your situation and if they offer competitive rates and terms compared to other lenders.
However, it's important to consider all of your options before making any decisions about refinancing.