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Who Should I
Refinance With?
Should I refinance with the company that currently
has my loan?
There are a number of dangers when considering your current lender for
a
refinance. Generally, they stem from the fact that the lender is in no
hurry to give up your current, higher-rate loan.
This is especially true if the refinance was
suggested by the lender. Why
would a lending company go out of its way to reduce your interest rate?
Because it is trying to forestall shopping around on your part. You might
find that rates and costs for other companies are more competitive than
those offered by your current lender. In that situation, the lender loses
the entire loan. If, however, the lender can reduce the rate enough to
discourage comparasion shopping (or even sell you a rate that is above
the
market level but close enough that costs would make refinancing
impractical) they are able to lessen their loss.
A lender who is refinancing your existing loan
may also drag out the
refinance process to keep you at the higher rate for as long as possible.
When a lender knows that they have your business and has locked you into
a
particular rate, why would they rush?
Don't let your lender take advantage of you by
being unwilling to shop
around. Find out what type of deal they are offering and do some
comparasion shopping. You might find that the savings are considerable.
If
you want to then talk to your existing lender, you'll at least have all
of
the facts.
There are some advantages to using your existing
lender that should also
be discussed.
If you have been responsible in your payments,
your current lender will
have direct access to those records. This can result in lower costs as
the
company can decide to forgo some of the requirements normally associated
with new loans, such as title search, appraisal, credit report, etc. This
can save you substantial time and effort.
The above only applies, however, if your loan
is not owned by the company
from whom you originally bought. This company would not have all of
records they require and would have less opportunity to save you costs.
In
this situation, you may have more luck contacting the original lender.
Happily, you can get a total of the costs involved from your current
company and consider that when shopping for the best combination of rate,
terms and costs.
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