Refinance with current lender?

There are pros and cons to refinancing with your current lender. The most obvious pro is that you don't have to shop for a lender. To some this benefit alone is significant. Additionally, if you have a good payment record, your current lender may be able to forgo some of the standard procedures like appraisals and credit reports. This can result in lower closing costs, saving you some money.

There are some cons to consider:

  • Since you're likely refinancing to get a lower interest rate, your lender may take their time. They won't be anxious to help you refinance at 5.5% if your current loan is at 7 percent.
  • Your lender may also take advantage of your unwillingness to "shop around", and charge an interest rate that's higher than the market standard. They may offer closing concessions on the front end if they can charge a higher interest rate over the long-term.

Don't assume that just because you have an existing business relationship with your current lender that they're going to give you special treatment. Talk to other lenders about their interest rates and closing costs. Then take those figures back to your current lender and find out what they're willing to do. If they're willing to meet or beat other lenders, then yes - refinance with them. If, however, they're inflexible with their costs, go elsewhere.