The Best Banks for Refinancing Home Mortgages

Even if you don’t look for savings as a retail comparison shopper, you may be incentivized to shop around when you refinance your home mortgage. Finding the best lender for your refinance potentially could save you lots of money by lowering your monthly mortgage payment and shortening your mortgage term. You may even be able to get cash back from your refinance to put toward your bills or make home improvements.

What Is a Mortgage Refinance?

A mortgage refinance is not a modification of your existing loan; it’s an entirely new loan. The lender who refinances your mortgage pays off your current mortgage and issues a new mortgage to you. Because a refinance is a brand-new mortgage, you’ll have to qualify for the loan, and you’ll also have to pay fees and closing costs.

Different lenders offer different interest rates, and they also have different fees – two reasons that make comparison shopping for a refinance an important part of the process if you want to save money and find the best mortgage refinance rates.

Reasons for Refinancing Home Mortgages

Your reason for wanting to refinance your mortgage may be different from someone else’s reason. Refinancing meets different needs, including:

  • Securing a lower interest rate. Market interest rates may be lower now than when you got your mortgage, so if you can refinance your existing higher-rate mortgage by getting a new lower-rate mortgage, you’ll save money over the life of the new loan than if you stayed with your current loan. And if your salary and/or credit score have improved since you qualified for your mortgage, this may also qualify you for a better rate.
  • Shortening your loan term. You may be able to shorten the time left on your mortgage while still paying approximately the same amount each month that you’re currently paying. The short-term payoff isn’t significant, because you’re still making the same payment amount. But in the long term, shortening the loan term reduces the amount of interest you pay over the life of the loan.
  • Converting an adjustable rate to a fixed rate. If you have an adjustable-rate mortgage, the interest you pay is variable. If market rates rise significantly, you may pay more interest over the life of the loan than if you had a fixed-rate mortgage. On the flip side, some mortgagors refinance their fixed-rate mortgage to an ARM to take advantage of an initial lower interest rate. This strategy is useful for homeowners who want to sell their homes in the next few years.
  • Consolidating debt or making home improvements. If you’ve been paying on your mortgage long enough that you’ve built up a fair amount of equity in your home, you may want to get a cash-out refinance. This type of mortgage refinance gives you cash back at closing, based on the equity in your home.
  • Changing to a different type of mortgage. If you have an FHA mortgage for which you made less than a 10 percent down payment, you’ll be paying mortgage insurance premiums for the life of your loan. But if you refinance your existing FHA mortgage and change to a conventional loan (if you qualify), you can stop paying the additional cost of mortgage insurance.
  • Adding or removing a borrower. Your marital status may have changed since you got your mortgage; for example, you’ve been married or divorced. If your current spouse is not on your mortgage, or if your ex-spouse is still on your mortgage, you may want to refinance the loan to add or remove someone.

Is Refinancing Right for You?

If you’re considering refinancing your mortgage, the lure of a lower interest rate or shorter loan term may be two of the reasons that tempt you to refinance. But there may be mitigating circumstances that change the face-value benefits of refinancing, which you can identify by answering these questions:

  • How long have you been paying on your mortgage? If you’ve been paying on your mortgage for many years, you may have significantly paid down the interest portion, which means you’re now building equity. If you start over again with a refinanced mortgage, you’ll go back to square one as you’re paying more toward interest than principal.
  • Does your mortgage have a prepayment penalty? Some mortgages have a prepayment penalty that borrowers incur if they pay their loan before its term is up, even for refinances. It’s possible that your lender will waive the prepayment penalty if you use the same lender for your refinanced mortgage. But if you have to pay the penalty, you’ll have to figure this cost in your overall cost-to-benefit analysis to find out if refinancing is financially worth it.
  • How much are refinance fees and costs? If the fees are greater than your overall savings, you may not want to refinance. But if your goal is to lower your monthly payment, you may decide that the cost of refinancing works for you.
  • Are you planning to sell your house soon? If the fees you pay to refinance are greater than your short-term savings before you sell your house, refinancing may not be your best option.

Shopping for Mortgage Refinance Lenders

Fees vary among lenders. One lender may charge a higher interest rate but have lower fees than other lenders. Another lender may have higher line-item fees, such as the legal fee and filing fee, but offer a lower interest rate.

Instead of playing a guessing game to try and figure out these fees, your lender must provide a good faith estimate. By law, lenders have to disclose all the fees and costs that come with your mortgage. By shopping around and comparing each lender's good faith estimate, you’ll be able to figure the cost of doing business with each lender to help inform your refinance decision.

Evaluating Potential Mortgage Refinancing Lenders

In addition to comparing refinancing costs on lenders’ good faith estimates, ask these two questions to narrow your search even more for the lender that best fits your needs:

  1. What types of refinances do you offer? Not all lenders offer the same mortgage products. If you want a 20-year mortgage, but a lender only offers 15- and 30-year products, that lender doesn’t fit your loan criteria. And not all lenders offer U.S. Department of Agriculture, Veterans Affairs or Federal Housing Administration loans, so you’ll have to shop around to match the right lender with the mortgage product that’s right for you.
  2. What’s the best interest rate you can offer? Lenders are competitive. If you find a lender that is willing to lower an offered interest rate even by a fraction of a percent, the lender may edge out other lenders, and you’ll stand to save a significant amount of money, particularly if you have a large loan amount that’s mortgaged for a long term.

Best Banks to Refinance Home Loan

The best bank to refinance your mortgage may not be the best bank for everyone’s needs. But when financial experts rate the best banks to refinance home loans, these three banks score high:

  • Bank of America. U.S. News & World Report rates Bank of America as the best lender for no minimum mortgage amount. Bank of America’s other accolades include good customer satisfaction ratings, an A+ rating with the Better Business Bureau and a J.D. Power rating of four out of five. Bank of America also offers VA, FHA and cash-out refinances.
  • Chase. Chase’s goal for refinances is to close each loan in 60 days or less. Refinance products include fixed- and adjustable-rate loans as well as FHA, VA and USDA loans. Exiting Chase customers may qualify for additional discounts. 
  • SunTrust. SunTrust also offers fixed- and adjustable-rate loans as well as FHA, VA and USDA loans. This bank has a Spanish translation of its website to assist Spanish-speaking borrowers with their refinances.

Best Nonbank Lenders for Refinances

Although you may only think of a bank to refinance your mortgage, there are other types of lenders that offer refinances. Examples are savings and loan institutions, credit unions and independent mortgage companies. There are a lot of players on the field of mortgage lenders who offer refinancing products, but this means you have numerous comparison-shopping options.

Among the best-rated nonbank refinance lenders are:

  • Fairway Independent Mortgage. U.S. News & World Report gives Fairway high ratings for customer satisfaction, with a score of five out of five in the J.D. Power satisfaction rating. This independent mortgage company offers most refinance products, including FHA, VA and USDA loans.
  • New American Funding. One feature of New American Funding is the cash-out refinance loan, which allows borrowers with home equity to tap into this resource by receiving cash at their refinance closing.
  • Veterans United Home Loans. As the largest VA home purchase lender, Veterans United Home Loans also offers refinancing products. This lender specializes in VA loans, but it also offers other refinance products, such as FHA and USDA mortgages.

Best Online Lenders for Refinances

In today’s digital age, online refinance lenders offer competitive rates and products to conventional lenders such as banks, mortgage companies, credit unions and savings and loan institutions. Known as “virtual refinancers,” these lenders conduct business entirely online. Borrowers may not have the personal service of a face-to-face representative, but the trade-off may be better rates because of the lack of overhead expenses that brick-and-mortar companies have.

Some top-rated virtual refinancers are:

  • Guaranteed Rate. With an A-plus rating with the Better Business Bureau, this refinance lender offers custom refinance quotes without requiring personal information. Guaranteed Rate has a mobile app that allows applicants to apply for a refinance, view credit scores and lock in quoted rates before they increase.
  • LoanDepot. This online refinance lender offers the option of face-to-face service at more than 150 affiliated locations for customers who don’t want to use its digital platform.
  • Quicken Loans. This lender has name recognition because of its tax software products. As one of the nation’s largest online lenders, Quicken Loans offers fixed-rate refinances for loan terms from eight to 30 years.

Using a Mortgage Broker

If the mortgage refinance shopping experience isn’t something you’d like to tackle, you can also use a mortgage broker to help with your search. For a fee, these brokers will do the shopping for you. They’ll help you find the lender with the best refinance that suits your needs. Sometimes, the lender pays the broker fee; sometimes, the borrower pays the broker fee; and sometimes, the broker fee is split between the lender and borrower.

You can shop around for a broker just as you can shop around for a refinance lender. Their fees vary as well as the lender/borrower responsibility for paying the fees.

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