Refinancing? Staying with your current lender might be the smartest move 

Your current loan servicer may offer better rates, faster approvals and fewer hurdles than starting with someone new.

Few things boost your budget like lowering your monthly mortgage payment. But when it comes to refinancing, you need both the right timing and the right partner. The solution may be closer than you think.

Reducing your mortgage payment can save you thousands over the life of your loan, depending on factors such as your home’s value, your loan balance and a potential interest rate reduction. In addition to standard rate‑and‑term refinances, some homeowners may also consider a cash‑out refinance to access equity and pay down higher‑interest debt or fund essential improvements, potentially lowering overall monthly obligations when the math works. When considering refinancing your mortgage, shopping around for the best offer is always smart. But don’t overlook the advantages of working with your current loan servicer. They already know your mortgage history, which can mean fewer delays, lower fees, and a smoother overall process. And when you factor in the strength of an existing relationship and the total cost of the loan, staying put can often be the best financial move.

“It can be easy to fall into the trap of thinking you have to move away from your current lender to refinance your mortgage.”

- Peter McCarthy, head of Home Lending at PNC Bank

 

“Exploring refinance options with a lender you have experience with and trust can impart benefits beyond just an improved rate.”

When’s the right time to refinance?

Before you make any decisions, it’s important to evaluate if it’s the right time for your financial situation. Deciding to refinance your mortgage requires careful consideration and thorough planning. You may want to consider refinancing if:

  • The new rate is at least 0.5 percentage point lower and the projected monthly savings support your goals (e.g., lower monthly payment or faster payoff); 
  • You plan to stay in your home long enough to offset any closing costs associated with refinancing;
  • You want to lower your monthly payment by extending the term of your loan;
  • You want to pay your loan off faster by shortening the term of your loan; 
  • You have equity in your home and want to access it through a cash-out refinance;
  • You want to change to a different loan type – such as moving to a fixed rate from an adjustable rate product; or
  • It allows you to avoid paying Private Mortgage Insurance. 

Conversely, you should avoid or reconsider refinancing if:

  • Your closing costs on the refinance outpace your savings on interest through the life of the loan;
  • You plan to move before your break-even point – that is, before savings from your lower monthly outweigh the upfront costs of refinancing; 
  • You’re at risk of defaulting on borrowed equity from your home.

The grass isn’t always greener

A refinancing decision doesn’t have to be made simply on rate savings. It’s important to consider the overall financial picture and evaluate potential lenders based on how they compete comprehensively, also considering other important factors. Refinancing your mortgage with your existing lender can come with important benefits:

Trust – There’s comfort in continuing or deepening your relationship with a lender you have a relationship with. You may also have familiarity with the provider’s technology, payment processes, security protocols and, most importantly, people. If they’re competitive on rates, familiarity can be a differentiator when looking to refinance.

Convenience – Pursuing a refinance with your existing lender limits the learning curve to the bank’s technology and payments processes. Additionally, you may realize efficiencies in the application process as your information and account data will be available to your lender.

Discounts – Depending on your relationship with the lender, you may qualify for promotional rates or discounted closing fees. Many lenders offer discounts for having additional banking relationships such as a checking account or investment account. Your lender may also be willing to match or beat the rate or terms from a competitor if you give them the chance.   

“Whether you’re searching for a more advantageous rate, term, product or something else entirely, refinancing a mortgage is about redefining your loan to better meet your financial goals,” McCarthy said.

“Sometimes that means a new relationship with a new lender. But quite often you can meet your changing needs without changing banks.”