Can I Change My Mortgage Provider? The Process

Changing your mortgage provider can refer to two distinct situations: changing the financial institution that owns your loan (the lender) or changing the company that manages your loan’s day-to-day operations (the servicer). Each scenario involves a different process and implications for the borrower. This article clarifies these distinctions and outlines the steps involved.

Distinguishing Between Mortgage Lender and Servicer

A mortgage lender is the financial institution that initially provides funds for your home loan or currently owns it. This institution originates the mortgage, determines terms, and funds the loan. After establishment, the lender may hold and manage the loan or sell it.

A mortgage servicer is the company responsible for ongoing loan administration until it’s paid off. This includes collecting monthly payments, managing escrow accounts for taxes and insurance, and handling borrower inquiries. The lender and servicer can be the same or different companies.

If your mortgage is sold, the new servicer must notify you of their payment address within 30 days. While the lender holds the mortgage note, the servicer handles practical aspects. When people consider “changing their mortgage provider,” they usually mean changing their lender through refinancing, a borrower-initiated action. A servicer change is typically not borrower-initiated.

Refinancing Your Mortgage: The Process of Changing Your Lender

Changing your mortgage lender after your loan has been originated typically requires refinancing. Refinancing involves taking out a new loan to pay off your existing mortgage, replacing it with new terms and a new lender. This process can secure a lower interest rate, change the loan term, or access home equity.

Preparatory Information

Before applying for a refinance, gather all necessary financial documentation. This includes proof of income, such as recent pay stubs, W-2 forms from the past two years, and federal tax returns for at least the last two years. If self-employed, lenders will require profit and loss statements and business tax returns.

Provide statements for all asset accounts, including checking, savings, and investment accounts, to demonstrate your financial reserves. Your current mortgage statements are needed for existing loan details. Lenders will review your credit history, so check your credit report beforehand to address any potential issues.

Refinancing involves various closing costs, typically 2% to 5% of the loan amount. These can include origination fees, appraisal fees, title insurance fees, attorney fees, credit report fees, and recording fees. Obtain a detailed estimate of these costs from prospective lenders before committing to an application, allowing you to compare offers comprehensively.

Procedural Steps

Once preparatory information and documentation are organized, the refinancing process begins with submitting a formal application to your new lender. The lender initiates underwriting, reviewing your application, financial documents, and credit history to assess your creditworthiness and ability to repay the new loan. This stage confirms that the proposed loan terms align with the lender’s risk criteria.

A property appraisal is a standard requirement during refinancing to ensure the loan amount is justified by the home’s current market value. An independent appraiser evaluates the property and provides a valuation report. A title search is conducted to verify clear ownership and identify any existing liens, ensuring the new lender will have a first lien position.

Upon loan approval through underwriting, appraisal, and title reports, the process moves to final closing. You will sign legal documents, including the new promissory note and mortgage deed, formalizing the new loan agreement. Funds from the new loan pay off your existing mortgage. The new lender disburses the funds, and the old mortgage is discharged, completing the transition to your new mortgage provider.

Understanding Mortgage Servicer Transfers

A mortgage servicer transfer occurs when the rights to service your mortgage loan are sold or transferred from one company to another. This is a common practice in the mortgage industry. The transfer does not change the terms or conditions of your mortgage loan, only where you send payments and who manages your account.

When a servicer transfer happens, federal regulations require both your old and new servicers to notify you. Your current servicer sends a “goodbye” letter at least 15 days before the transfer date, indicating when they stop accepting payments. Your new servicer sends a “welcome” letter within 15 days of the transfer date, providing contact information and payment instructions.

During a servicer transfer, pay close attention to the date payments should be directed to the new servicer. If using online bill pay, update the recipient information. Monitoring your account activity and verifying payments are correctly applied by the new servicer helps ensure a smooth transition.