Reasons to update your home loan (i.e. refinance)
Whether you want a lower interest rate, better terms, or to switch from a floating rate to a fixed rate, refinancing makes it all possible.
When you refinance, you pay off your existing loan (sometimes breaking the contract), and take out a new loan. If your contract is about to expire, it’s a great time to refinance because you avoid the break fee, and can save money on your loan.
Deciding to refinance a big decision, but it’s not the only one. Now you must decide, do you keep the same lender or switch lenders?
It seems logical to stay with the same lender. You know how they operate and you may have to jump through fewer hoops for approval. While that may be true, there are many reasons to consider switching to a new lender.
Here are the top reasons.
You May get More Competitive Rates
What do lenders do to get your business? They compete for it by offering lower rates. If you stick with the same lender, they’ve got you. They don’t have to lower the rates much because you’re already a customer.
If you switch lenders, they’ll try to compete for your business by outdoing one another with lower interest rates. Use the opportunity to get rates from 3 or 4 lenders and see who offers the best deal.
You May Have more Loan Options
Each lender has different loan options, some more than others. When you switch from one bank to another, you may have access to loans with shorter terms, lower rates, or more attractive features.
For example, if you want to take cash out of your home’s equity, you may need a cash-out refinance. Not all lenders offer cash-out refinances at all LTVs. If you can’t qualify for a cash-out refinance with one lender, you may try another lender.
Your Lender May not Offer the Term you Need
When you refinance, you reset your loan’s term. For example, if you have a 30-year term, but you only have 18 years left on it, you may not want a 30-year term again. If you do, you lose all the years you already paid on the loan.
Choosing a new lender may provide you with more term options. Some lenders only offer 25 or 30-year loans, while other lenders offer more options, making it easier to save money on your loan and keep the term short.
Refinance your Mortgage with a New Lender
If you’re looking for new possibilities with your mortgage, check out a new lender. Whether you get lower interest rates, take cash out of your home’s equity, or get a more favorable loan program, there are many benefits of refinancing.
Make sure you understand your current contract and the fees you’ll incur if you refinance. Knowing the bottom line will help you determine which loan is right for you. Sometimes it’s not just about the interest rates, but about the big picture.