Should you refinance with the same lender as your original loan?

You don't need to refinance with the same lender as your original mortgage, though it could be a good option if speed and convenience are important to you. Start by contacting them to see what refinance options they offer. To prioritize getting the lowest rate, try shopping around for a different lender and compare at least two different loan offers. If another lender offers you a better rate, you can go with them or use the quotes to negotiate a better rate with your current lender.

Are refi mortgage rates different from purchase rates?

There may be a slight difference between average refinance rates and average rates for purchase loans (the initial mortgage taken out on the home). The bigger difference between buying a new home and refinancing your current mortgage tends to be with the closing costs. The closing costs for refinances are lower, averaging less than 1% of the total loan amount. There are some exceptions in New York, Pennsylvania and Delaware, where closing costs are significantly higher.

How much does refinancing cost?

Refinancing involves paying closing costs, although the costs tend to be lower than with a new purchase loan. You should expect to pay 2% to 5% of the total mortgage value depending on the size of the loan, although you may be able to roll closing costs into your loan balance. In 2021, the average closing costs to refinance a mortgage for a single-family home added up to $2,375, according to data from ClosingCorp. That figure doesn't include any local taxes, which can add thousands in certain parts of the country.

Is refinancing worth it?

To figure out if refinancing makes financial sense, you need to determine your break-even point, i.e., when your projected savings are greater than the costs associated with refinancing the loan. This ultimately comes down to how long you plan to live in the home. For example, if you're going to pay $6,000 to refinance your mortgage for a lower rate, you'll need to determine if you'll be in the home long enough for the total monthly savings to add up to more than $6,000.