Refinancing is a great way to save money. But is it best to work with your current bank, or maybe shop around for a better rate?
Traditionally, most refinance takes around 30 days. However, you may now have to wait six to eight weeks for the application to be processed and completed.
If you are considering refinancing, allow enough time to look at possibilities but be prepared to move forward quickly.
Should you refinance with your current lender?
You don’t need to refinance with your current lender unless you are satisfied with the company.
If you are, it may be tempting to apply to refinance with them, ignoring other lenders. It will save you time by sticking with your mortgage lender, rather than choosing a new lender, completing new documents, or learning the processes the new lender may have.
However, making the decision based entirely on convenience may be an expensive mistake.
If you work with your current lender their main focus will likely be retention, but that does not mean they’ll offer the best deal.
If you are considering refinancing, compare the numbers from multiple mortgage lenders. Once you have all the information, including costs and lender fees, you can decide whether to switch mortgage lenders.
Should you choose another lender?
With new lenders fighting for your business, they are more likely to offer incentives with their refinance offers.
While your current lender may still come out on top, you should still compare rates from at least three different lenders.
When comparing rates from lenders, take time to talk to the lenders. Don’t just look at their advertised rates; get quotes based on your specific information — equity, credit score, property value, etc.
Getting more detailed quotes may take more time, but the extra few hours of research could save you thousands of dollars on your loan.
How do I qualify for the lowest rate possible?
As the consumer, you have much control over the mortgage rates you may qualify for. Although you can’t control the market, there are three key things you can do to ensure you get the best rates available.
- Choose a shorter loan term
- Boost your credit score
- Compare lenders and rates
Choose a shorter loan term
Lenders often offer lower rates to borrowers with lower risk and opt for shorter-term loans.
Payments on your loan will be higher; however, you could save thousands of dollars in the long run by paying off your loan faster.
Boost your credit score
Loan-seekers with a healthy credit history and high credit scores qualify for the best interest rates. You can boost your credit score by paying all your bills on time, removing errors from your credit report, and reducing consumer debt.
If you have recently paid off debt, including monthly payments like your cell phone bill and utilities on your credit report may be beneficial.
As you make these payments on time and in full each month, you can give your credit score a boost.
You can get pre-qualified from multiple lenders without negatively affecting your credit score.
Compare lenders and rates
One of the simplest ways to save on your mortgage refinance is to consider multiple lenders.
Fees and interest rates vary between companies and even between different locations within the same company, so it may be advantageous to negotiate terms with your first choice or talk to multiple companies, saving you thousands of dollars.
Additional costs to consider
When planning to refinance, remember that a mortgage refinances the equivalent of taking out a new loan, which comes with attached fees.
Most lenders charge around 1% on refinances and an adverse market fee of 0.5%. The adverse market fee applies to all refinances over $125,000.
On a standard refinance of $300,000, the fees would total around $4,500.
Consider the fees when considering refinancing and how long it may take to break even. Research is critical to refinancing, so choose the interest rate that saves you the most money.