If you’re considering refinancing or buying another home, working with your old lender could offer distinct advantages.
From Yahoo Homes 10/31/14
Save big by working with your former lender
The saying “If it ain’t broke, don’t fix it” could apply to lots of things, even mortgage lenders you’ve worked with before. As it turns out, mortgage brokers are highly incentivized to give return customers the royal treatment and in some cases, even cut them a financial break, when they come back for a refinance or another home purchase.
Why? Because mortgage lenders understand that their reputations are on the line, and frankly, their livelihood depends on it.
“In the mortgage business, and really in any business, repeat clients are the lifeline of your company,” says David Hall, President of Shore Mortgage in Troy, Michigan.
So if you were happy with the service you got from your mortgage professional the first time around, it makes a lot of sense to use them again. Read on for the pros of sticking with your old lender on your next home purchase or refinance.
Perk #1: Repeat Customer Discounts
You know how you earn loyalty points – and eventually free coffee – for sticking with Starbucks for your morning latte? Well, the same logic can apply to home loans, albeit on a much grander and less frequent scale. Go back to your original lender, and you could find that she or he is willing to slash some of the mortgage costs your second time around as a thank you for choosing to work with them again.
Customer retention can be a major motivation for lenders and banks to provide some kind of savings to repeat customers, according to Yael Ishakis, a loan officer and vice president of First Meridian Mortgage in Brooklyn, New York.
Her own company First Meridian offers most repeat clients something called the “Fast Track” program. The program benefits repeat customers the most in regards to reducing their closing costs.
“We try to keep [closing costs] as low as possible, and in certain cases, we run a promotion covering the closing costs or some of them through our lender-paid closing program,” says Ishakis.
Though closing costs vary from state to state, Ishakis says in New York they’re around 4 percent of a home’s purchase price and in New Jersey around 2.5 percent. So for your reference, closing costs on a $300,000 home would cost $7,500 in New Jersey and $13,500 in New York. So having some or even all of that waived could yield a savings of a few thousand dollars, depending on where you live.
As far as refinances go, mortgage lenders may work with their vendors to reduce the closing costs (appraisers, etc.) to make it as cost effective as possible for the client, says Ishakis.
Furthermore, whether you’re refinancing or simply looking to buy a new home, Ishakis says quality former lenders will try to get you the best deal and won’t simply offer you the same mortgage as before.
“For example, if someone tells me that they plan on moving in five years I would be prone to give them a 7-year adjustable rate mortgage [with a much lower rate] to save them money,” says Ishakis. “I would decide the term according to their needs at the time.”
Perk #2: Hassle-Free, Faster Paperwork
Nobody likes paperwork, right? Whether you’re at the doctor’s office or the DMV, it’s always a drag to sit with a clipboard and sift through a seemingly endless amount of questions. The same goes for the paperwork involved in the mortgage application process, along with the documents you need to provide.
What if we told you it could be quicker and easier? All you have to do is simply go back to your previous lender for your refi or new home purchase.
When a former customer returns, Ishakis says the first thing a lender will do is retrieve their old file. While your former officer must tailor your new loan to your current situation, that former file can provide the paperwork foundation for your new application, particularly if some of your financials and employment have stayed the same.
“A lot of the paperwork can be reused so it will save a bit of the hassle,” says Ishakis.
Still, while the paperwork process should be easier, Ishakis says there are some things that must be current, updated, and verified.
“Every lender will require up-to-date tax returns, pay stubs, and bank statements,” she says.
So it’s best to have those documents ready and with you when you first revisit your lender to speed up the entire loan procurement process.
Perk #3: Potential Bank Bonuses
Sometimes putting all your eggs in one basket pays off big time. This could be potentially true at a local or national bank chain, which may have the resources to offer additional perks when you invest more of your money with them through a mortgage and maintaining an account with a high balance.
So if you’re looking to refi or secure a second mortgage, consider asking your current banking partner or inquire about mortgages at another large bank to see what deals might be available if you were to bundle together an account or two with your mortgage. Bank branch financial representatives should be able to give you all the details on qualifying for whatever perks they offer when discussing loan and account options with you.
Again, Ishakis says these types of perks from banks have to do with customer retention, almost like a cable company offering you a Visa card or a free year of DVR to stay with your current service provider.
“A bank may want all the business – not only the mortgage but the account deposits and investments,” says Ishakis. “This gives them an opportunity to keep the customer happy.”
And just how will they keep you happy? Well, let’s just say it’s not by offering you unlimited movies or a free landline. Often, Ishakis says, if you maintain a high total relationship balance (including savings, checking, mortgage balance, etc.) with a bank, you could be entitled to perks like free ATM withdrawals everywhere, free money transferring services, access to higher interest rates on savings accounts, free checks, or a free safety deposit box.
As far as direct benefits to your mortgage itself goes, Ishakis has seen some “free appraisal” offers, which could save you a couple thousand dollars, depending on the market you’re in.
It is important to realize, however, that your total use of these “perks” should be substantial enough to offset the mortgage costs you’d be incurring over the life of the loan. If you go this route, make sure the bank’s financial representative understands your mortgage needs and can offer competitive interest rates.
Ultimately, it helps to remember that a mortgage is not just processing paperwork, says Ishakis.
“A good loan officer understands the whole picture and will give advice and work to structure a loan that is perfect and unique to the client,” she explains.