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With so many competing mortgage lenders out there, savvy consumers can shop around from lender to lender in search of terms that they prefer. For example, you may have already heard that changing your mortgage lender can help secure a better interest rate on your home loan. But how do you go about finding a new lender and switch your mortgage from your existing lender (or designated servicer) to a new lender? How do you know when the time is right to start shopping? Let’s dive in.


How Do I Switch My Mortgage Lender? Does My Home Loan Need to Be Transferred?

If this is your first time refinancing your home, or it’s been a long time since the last time you refinanced, you don’t need to fret. When you refinance your home, as part of the ordinary process of originating refinances, your prospective new mortgage lender will likely request a payoff from the servicer of your current home loan. This payoff document should outline the outstanding balance on your loan in dollars, and relay instructions for the new lender to pay off their loan when it comes time to close on your home refinance. Once your existing home loan is paid off and you receive instructions from your new lender, you may begin making payments to your new mortgage lender.

In short, to get started with moving your home loan to a new lender, speak to a loan officer at the new mortgage lender you’re thinking of borrowing from. Part of the refinance process involves the new lender “paying off” the old home loan on your behalf.


Why Switch to a New Lender?

There are a few reasons why you, or another homeowner, might choose to leave one home lender and refinance with a new lender. Consider an example case: Five years ago, Frederico took out a conventional 30-year mortgage on his single-family home, and he has made regular payments to his lender, whom we’ll call “Vineyard Bank.” After joining the Air Force and serving for the appropriate length of time to qualify, he has become eligible for a Veterans Affairs (VA) home loan. Instead of applying for a VA refinance through Vineyard Bank, he instead chooses to take out a VA loan through a new lender, “Ace Credit Union”, to refinance.

Here a couple reasons Frederico might choose to switch home lenders:


  1. Frederico is more happy with the loan terms offered by Ace Credit Union than those offered by Vineyard Bank. Maybe Ace Credit Union can offer him a lower interest rate than its competitors can, or Frederico would rather seek a 15-year home loan at Ace than a new 30-year at Vineyard.
  2. Frederico prefers the customer service experience at Ace Credit Union. Intangible qualities like salesmanship and customer service are valued by consumers, and they may gravitate towards lenders with a positive reputation for customer service. Maybe Ace Credit Union is known among his Air Force peers as a great option to secure a VA home loan refinance.


Potential Downsides of Finding a New Mortgage Lender

Some consumers may worry that switching mortgage lenders can be risky or time-consuming, but it’s good to remember that mortgage lenders are incentivized to lend people money, and are sometimes willing to offer terms that their customers prefer in order to persuade them from borrowing at a competing lender. In other words, a lender generally wishes to do business, and so they are motivated to protect potential customers from coming to financial harm in their care. Many lenders choose to make themselves more attractive to potential borrowers by trying to save their customers money wherever they can.


Deciding to Switch Mortgage Lenders

Ultimately, it will be your decision whether to switch lenders or consider a home refinance with your current home lender. Carefully compare any loan estimates you receive, putting the proposed terms and payments from each lender side-by-side to evaluate their relative pros and cons. Discuss the decision with people you trust to give you sound financial advice. Good places to compare between competing mortgage lenders are your interest rate and estimated monthly payment.

When you make the right financial decision for yourself and your family, secure approval, and close on your home refinance, you can breathe easy and enjoy the new loan terms that you’ve worked hard to secure!

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.