Where Should I Refinance My Mortgage?

Find out where to refinance your mortgage

With current mortgage interest rates near all-time lows, most home owners who can qualify for a mortgage refinance are either in the process of refinancing their mortgage or thinking about it. With all of the upheaval in the mortgage markets because of the credit crisis, many of the places where borrowers have gone to get their mortgage refinances in the past are gone. Below is a comparison of current options where you can refinance your loan in today's market if you need to refinance your conventional limits and lower your mortgage payment.

Unfortunately, at least for 2009 and into 2010, those days are over.

1. Your Existing Loan Servicer. Logic would normally dictate that the lender who is servicing your loan would want to keep your business and therefore would offer you some type of special deal for refinancing and sticking with them. However, this is only the case about half the time. Some loan servicers actually do want to keep your business so they will at the very least offer you a mortgage rate that is at least competitive with most other lenders. On the other hand, some loan servicers are instructed by their investors to avoid offering refinance deals so they can keep the existing loan in place as long as possible. Another issue is that many loan servicers are now servicing loans for lenders that have disappeared and they do not have the ability to refinance your loan.
2. Large Banks. Another traditional source of financing would be your bank. If you bank with a large national bank, those types of banks do have mortgage money to lend through the Fannie Mae, Freddie Mac and FHA loan programs. On the one hand, these banks have deposit relationships with you and they pride themselves on cross-marketing (in other words, giving you a deal to choose multiple products with them). So it would stand to reason that you would get a better deal if you had banked with your bank for many years and had checking and savings account with them. Sometimes that is the case, but just as often the large banks actually offer higher than market rates and use their extensive branch network to gather in as many non-shoppers as possible. The mortgage divisions of these banks are usually completely separate from the banking division, eliminating the incentives for cross-marketing. So it definitely pays to shop around.
3. Mortgage Brokers. Mortgage brokers place loans with banks and mortgage brokers. They are offered wholesale pricing which means that theoretically they can shop for the best deal and when they find it you should not pay more than if you went directly to the same lender (some lenders, like many insurance companies, work exclusively through brokers so you have to use one anyways. The lenders where mortgage brokers can place your loan are usually highly focused on just mortgages and in theory should be more efficient and be able to offer better pricing. As long as your mortgage broker is charging a reasonable fee and is not trying to gouge you, getting access to these better priced lenders could be a good way to get a better deal on your mortgage.
4. Mortgage Bankers. A mortgage banker can offer home owners a competitive deal on their mortgage refinance because of their efficiencies of scale and direct access to credit markets. Mortgage bankers originate mortgage loans directly and sell them to Fannie Mae, Freddie Mac, FHA or other institutional investors. They should be more efficient and be able to provide better pricing, especially since mortgages are their only product. Most mortgage bankers are regional, but some on-line mortgage bankers offer loans on-line nationwide.

No matter where you go for your mortgage, shop around first and get everything in writing once you apply and lock in your rate.

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