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When you have a mortgage, refinancing could save you a ton of money. In most cases, it reduces your monthly payment and your overall term, allowing you to breathe a little and pay off your home faster. Choosing to refinance your home loan is just one choice you’ll have to make, followed by a look at who you will choose to refinance with.
There are a lot of refinance options to choose from, which increase competition and keeps the rates relatively low. Still, Choosing the one that works best for you can be confusing. Below, we’ll take a look at:
- Online banks
- Traditional banks
- Mortgage brokers
We’ll sum them up and hit on the pros and cons with each, helping you get a better idea of which option is the best for you.
Everything else is online so, why not banks? The surge of online banks has increased over the last few years, as more and more people do their business online. Though it seems like a good option when refinancing, there are a few things that you need to watch out for with online banking. To get a better idea, let’s look at the pros and cons.
- Lower fees
- Better interest rates
- Standard banking services like ATM service and security
- No branches
- No relationship built
- Limitations to managing your money
Traditional banks have been around for a long time. Their long-standing has allowed them to work out the kinks and make a solid reputation for themselves over the years. When it comes to refinancing your home, a traditional bank could be a good option, especially if you like to put a face with your finances.
- Local branches
- Able to build relationships
- Online banking options are available
- Better interest rates over the long term
- Can be more expensive
- The application process is more strict
- Terms and conditions when refinancing a home
Because mortgage lenders deal with homes, they can offer a lot more options when it comes to refinancing. When comparing them to traditional banks and online banks, they are good in some ways and fall short in others.
- Lots of loan options
- Specialist in home loans
- Have more credit options
- They often sell your loan after closing
- Some don’t have physical locations
Now that you know a few of the pros and cons of each, which one should you choose when refinancing your home loan? When answering this question, one of the key questions to ask yourself is whether or not you have a solid standing with one or the other.
Banks and other lenders tend to give long-time customers better deals as they have a trustworthy relationship with them. If you’ve banked with an institution for a long time, you could qualify for better rates. Plus, you may already have a good relationship with an agent.
As far as mortgage lenders, they are a solid choice too, as they can span out and usually provide you with more options and more lenders than a bank. They act as the middle man between the buyer and the lender, able to connect both with the best match.
How to Decide
Because there are pros and cons to using every refinancing option, you might still be wondering how to choose. Below, we’ll walk you through the steps to choosing the option for you.
1. Shop around
You can always contact multiple institutions for an estimate. Try speaking with a bank and a mortgage lender, seeing what kinds of deals they can offer.
Once you see what each is working with, you can start to narrow your choices based on your budget and the term you’d like to pay.
From there, you have a little wiggle room to bargain, which is encouraged when refinancing. In the end, you can go with the one that gives you the best rate and the lowest interest overall, and the most trustworthy experience too.