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Switching Lenders to Refinance Your Mortgage Has Its Pros And Cons

If you’re thinking about refinancing your home loan, consider switching to another mortgage lender.

Heather McRae is a senior loan officer at Chicago Financial Services. She says that loyalty to lenders can lead to poor results. This is particularly true in today’s refi market, where lenders compete fiercely to win customers.

According to a Black Knight Report, Lender retention has fallen to an all-time low. 18% was the lowest percentage of homeowners who refinanced their homes in 2020’s fourth quarter.

These are the benefits and drawbacks of switching lenders when you refinance your mortgage.

Pro: You may qualify for a lower mortgage rate

David Mele, President and CEO of Homes. Com, suggest it doesn’t hurt to shop around. Mele states that although many borrowers prefer to stay with the same lender when refinancing, they may not always be the best. 

It is worth shopping around to find the best deal. If your account is in good standing, you may be eligible to receive the lowest refi rate. Different lenders have different lending requirements.

It doesn’t mean you have to contact every lender in your area. McRae suggests getting quotes from at most three lenders to compare your options. McRae spoke to a recent refinancer who had spoken with 11 different mortgage lenders. It’s unnecessary. If you visit multiple lenders, you won’t receive drastically other offers.

McRae recommends getting a quote from an existing loan servicer to see if they offer mortgage refi. Some do not. Be prepared to fill out a lot of paperwork.

 According to her, while people may believe that the application process will be more straightforward if they stay with their loan servicers for the duration of the loan, the truth is that you will need to submit the same information and documentation to your servicer that you would go to a new lender.

Con: Customers are not treated well by a new lender

It is essential to build trust and a relationship with your lender. Homespire Mortgage’s chief operating officer is Todd Sheinin. It can be invaluable to have someone you trust with your money. He says that your home is the most important investment you’ll make. “Some lenders treat customers better than others.”

Consider your relationship with your current lender. Sheinin suggests asking the following questions: “Were you kept informed about all aspects of your mortgage?” Is it true that you felt you got complete attention from your loan officer? Did you get a great rate? Are you in regular contact with your lender?

It is crucial to have a lender that responds quickly when things go wrong. For mortgage forgiveness, apply for borrowers with FHA loans, VA loans, or USDA loans backed by the government; there are forbearance options. This allows borrowers to cancel or modify their loans and puts their mortgage payments on hold for 30 days.

Pro: You may get lower closing costs

Refinance fees are typically between 2% to 5% of the new loan amount. A $300,000. For a $300,000. Title searches, home appraisals, and other services can be more expensive than others. You might find a different lender that offers lower closing costs than your current lender.

Sheinin states that lenders may offer discounts to reliable and current clients to help them keep their business. Based on the client’s situation, the lender might offer a value of up to $1,000 on closing cost.

McRae cautions there is a caveat. McRae warns that lenders may offer credit to pay some or all of the closing costs. “This almost always means that a lower interest rate is possible.”

Con: You could face a prepayment penalty

Prepayment penalties are rare, but lenders will charge fees to borrowers for paying their mortgage off before the loan term expires. There are many prepayment penalties.

 Lenders might charge customers a percentage, usually between 2% to 3% of the principal. Others charge prepayment fees based on how much interest the borrower would pay over a specific number of months (typically six).

Look for the phrase “prepayment disclosure” in your mortgage agreement to find out if your lender has any prepayment penalties and, if so, how much.

The bottom line

Refinances with your current lender are not required. It is up to the individual to decide whether switching to another lender is good. It depends on your priorities and what rates and terms you can get from a new lender. It is essential to narrow down your options. 

 KashPilot offers some valuable resources that will help you narrow your choices. Best Mortgage Refinance Companies for 2021.

 

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Author: Julie Snearl

Editor and writer for over a decade , she has written and edited finance for both national technical and consumer readership, Julia Snearl is the editor for Personal Finance in KashPilot. Her experience in editing business books also includes working as the editor of charts of Ahead of the Curve. More than 3 years' experience in editing content for finance on KashPilot, Julie is interested in learning about how to use digital content to assist people make better financial choices.


Types of Loans We Offer

Installment Loans

Receive your cash and repay it in equal monthly installments. Each payment will include interest, and prepayment is any time without penalty.

Payday Loans

Payday loans online are loans given to people who need money in the short term. Most payday loans are meant for small expenses, such as utility bills or vehicle repairs

Loan Consolidation

KashPilot Offers Loan Consolidation Online for Bad Credit, these are people who can’t manage their loans or can’t repay all the fees and rates (apr) on right time.

Title Loans

KasPilot Offers Title Loans, Your vehicle’s title serves as collateral for a loan you may think of as a secured loan. When you use your car as collateral for a loan



FAQ's

A Payday Loan can be used to cover costs until your next income arrives. Whether you need to pay rent, cover an unexpected medical bill, or purchase groceries, Payday Loans can provide you with the quick cash you require.

You must produce identity, proof of income, a bank statement, and a personal check in order to qualify for a loan. If you do not have a personal check, you can offer a debit card or ACH authorization in several jurisdictions. There is no requirement for personal property to obtain a Cash Advance.

Payday loans are short-term loans owing on the borrower's next payday. Timing is contingent upon your pay schedule.

KashPilot's Payday Loans are accessible to all credit types. When KashPilot evaluates a Payday Loan application, a credit history is among the many elements analyzed.

Yes, Cash Advances are often referred to as Payday Loans. This is a short-term, personal loan that is payable upon receipt of your next paycheck.

State legislation establishes the maximum amount of money you can get through a Payday Loan. In addition, you will qualify for a specific loan amount, within the permissible range, based on your current income.

When evaluating your Cash Advance application, we may use information from third-party data sources to determine your creditworthiness.

Typically, your Payday Loan is payable on your next payday. We provide numerous payment alternatives, including in-person and online payment choices, to make the repayment of your loan easier (varies by state).

KashPilot has assisted thousands of individuals with poor credit by offering a number of financial options, such as Payday Loans, Online Loans, Installment Loans, Title Loans, and Personal Lines of Credit.