Can You Refinance Through the Same Bank?

Refinancing a mortgage replaces an existing home loan with a new one, often with modified terms like interest rate or loan duration. This allows homeowners to adjust their mortgage to better suit their financial situation. The main goal is typically to achieve a more favorable outcome, such as reducing monthly payments, securing a lower interest rate, or accessing home equity.

Refinancing with Your Current Lender

It is possible to refinance your mortgage with your current bank or lender. Many borrowers consider this option due to the convenience of an established relationship and familiarity with the lender’s processes. An existing relationship can streamline parts of the application, as some information may already be on file.

Homeowners explore refinancing for reasons like seeking a lower interest rate, shortening or extending the loan term, or converting an adjustable-rate mortgage to a fixed-rate one. A cash-out refinance can also access home equity for purposes like home improvements or debt consolidation. To start, contact your loan officer or customer service department to inquire about options. This helps determine if the current lender can offer terms aligning with your financial objectives.

The Refinancing Process

Information Gathering and Preparation

Before applying for a mortgage refinance, gather financial documents. Lenders require this information to assess eligibility, verify financial stability, and determine loan terms. Essential documents include recent pay stubs, W-2 forms from the past two years, and federal tax returns for the last two years, especially if self-employed. These confirm income and employment history.

Provide statements for all asset accounts, such as checking, savings, investment, and retirement accounts, to verify available funds. Proof of homeowners insurance and a recent mortgage statement are also necessary. Details regarding other outstanding debts, such as credit card, student loan, or auto loan statements, will be required to calculate the debt-to-income ratio. Organizing these documents can expedite the application.

Procedural Action

After gathering information, submit the refinance application online, in person, or via mail. Once submitted, the lender begins underwriting, reviewing your financial information, including credit history, income, assets, and debts. Underwriters verify accuracy and ensure you meet the lender’s criteria for the new loan. This stage typically takes one to two weeks.

A property appraisal is usually required during underwriting to determine the home’s market value. An independent appraiser evaluates the property’s condition, features, and comparable sales, with the report typically available within 6 to 20 days. The appraisal helps ensure the loan amount is appropriate for the property’s value and can impact loan-to-value ratios. After successful appraisal and underwriting approval, a Closing Disclosure is provided at least three business days before closing, detailing the final loan terms, interest rate, monthly payment, and all associated closing costs.

The final step is closing, where you sign legal documents to finalize the new loan and pay off the old one. These documents include the promissory note and the deed of trust or mortgage, which grants the lender a lien on the property. Closing costs, typically 2% to 6% of the loan amount, are paid at this time. After signing, loan funds are disbursed. If it is a cash-out refinance, additional funds are typically received within a few days. The entire refinance process usually takes between 30 and 45 days, though it can range from 15 to 90 days.

Key Factors to Consider

When considering refinancing, evaluating several factors is important. The interest rate offered is a primary consideration, as a lower rate can significantly reduce total interest paid and potentially lower monthly payments. Compare the rate offered by your current lender against prevailing market rates and offers from other lenders. New loan terms, such as duration (e.g., 15-year versus 30-year) and fixed or adjustable rate, also play a significant role. Shortening the loan term can lead to substantial interest savings, while extending it can reduce monthly payments, though potentially increasing total interest.

Closing costs, typically 2% to 6% of the loan amount, include fees such as origination, appraisal, title services, and recording costs. While some lenders offer “no-closing-cost” options, these costs are often rolled into the loan principal or result in a higher interest rate. Understand if your current lender offers discounts or waivers for existing customers that could reduce these upfront expenses. Calculating the “break-even point”—the time it takes for savings from a lower interest rate to offset the closing costs—is a useful analytical step.

The convenience of staying with a familiar lender, which may involve a streamlined process due to existing customer data, should be weighed against potential for more competitive rates or terms from a new lender. While convenience is a benefit, shopping around with multiple lenders can yield better financial offers. Customer service quality and your established relationship are also valid considerations.

Even existing customers must meet eligibility requirements for a new loan. These include a minimum credit score (often 620 or higher for conventional loans), sufficient home equity (at least 20%), a manageable debt-to-income ratio (43% or less), and stable income. These criteria ensure capacity to repay the new mortgage.