If the loan had been sold to one of the federal secondary market agencies, Fannie Mae or Freddie Mac, the guidelines are theirs. While both agencies have provisions for “streamlined refinancing documentation,” the discretion granted the lender, and therefore the potential for cost savings, is quite limited.
The fact that your current lender would have lower settlement costs than a new lender does not necessarily mean that you will receive the benefit in your mortgage price. If your current lender believes that you will accept any rate that is below your current rate, it is very unlikely that you will receive the best possible deal.
The best argument for ignoring your current lender is that you can take advantage of Internet-based shopping at sites offering competing lenders, many of which may not have existed when you took out your current mortgage.
I don’t mean to suggest that Internet-based shopping is a walk in the park — it has its own challenges, and yes, it has its hazards as well. But help is available, which is not usually the case when dealing with your current lender.
Jack Guttentag is professor emeritus of finance at the Wharton School of the University of Pennsylvania.
©2013 Jack Guttentag
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