We’ve all seen the commercials, and we’re all familiar with the basic concept of refinancing; it has a chance to save us money. However, many people simply assume that refinancing with the lender who made the initial loan is the wisest course of action – this is not always the case. This article will briefly discuss the issues a borrower should consider when deciding who to refinance with.
Like all things, it’s a good idea to survey the field before committing to any course of action; lenders are competing for your business because every refinance they take away from a competitor is more money in their pockets. There’s a good chance they will have attractive offers that would otherwise miss out on based on blind loyalty (which your current lender is banking on).
While surveying the field, be aware that interest rates aren’t the only thing to consider; closing costs on refinances average approximately ($3,400), so finding a lender with low closing costs is a factor to consider. Moreover, refinance shoppers should pay attention to whether or not you are required to prepay in order to get a lower interest rate (these are called “points”). Armed with this information, you will be able to make the best decision possible.
Of course, it’s possible that your original lender really is the best option. Convenience is worth something and refinancing with your lender will likely be more convenient since they already have your financial information and evidence of your ability to pay; this could speed the whole process up significantly. Refinancing with your current lender likely means you will pay less in fees as well. Additionally, there are no rules against trying to negotiate more favorable terms with your current lender, and you may have more success given your pre-existing relationship with the lender.
If your research leads you to the conclusion that another lender is a superior option, and your current lender won't match terms, or sweeten the pot, you need to be ready to jump ship and pursue a better option. At the end of the day this is about your long-term financial well-being, and loyalty won’t take care of your retirement account.
At the Chernov Team we understand that knowledge is power, and knowledge of how to maximize the value of a refinance is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.