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  • Can You and Should You Switch Mortgage Lenders?

    April 16, 2017 | Blog
  • Switch Mortgage Lender

    A Mortgage is a long term commitment, and it's vitally necessary that right choices are made initially to avoid financial loss & frustration in future. Most borrowers are becoming increasingly sensitive to changing market conditions, lenders behavior & other factors. Having said that, there are also some people who think that this process is unchangeable. This isn't true.

    As a borrower, there are certain aspects that one can leverage during the lending process. Of course, the short answer is 'yes,' if, for any reason, a borrower is not satisfied they can switch mortgage lenders. There are many reasons why a borrower may consider switching over to another mortgage lender. Here is a list of few reasons:

    1. Constant Delays: This is a major trigger that needs to be identified immediately. Sooner or later this becomes evident. Some lenders might take more than the required time to get back to customers, take their own time in responding to queries and constant delays in other aspects as well.

    2. Drop In Rates: Another lender might offer a better deal regarding interest rates which might interest the borrower. This is one of the most common reasons for the switch. There are many lenders out there offering competitive rates, and this might leave the borrower in constant confusion whether or not to switch.

    3. Lack Of Trust: Another major cause of switch is the lack of trust. There are many reasons for lack of trust. For a consumer, it could be delays, unanswered questions, lenders inability to handle objections concerning fees or other charges or simply unorganized behavior.

    4. Wait Time: Believe it, or this is one of the top most reasons to switch mortgage lenders. The entire process takes time, and this makes room for various factors to creep in which gives the borrower a reason to consider a switch.

    It is apparent that no matter what the reason is, a borrower can switch to another lender. Once a decision is made, there are a few questions that still need to be answered.

    What is the extent of my obligation?


    Although there is a certain obligation to the lender to send the borrower the necessary application, the lender has no say in the acceptance process. It is totally up to the borrower to make this decision. The borrower is free to switch to another lender at any point in time.

    Application Fees


    In 2010 the Federal Reserve Board proposed a rule to allow customers 3 days to cancel an application and receive a refund if any upfront fees were paid.

    You might be charged a minimal fee if you have authorized the bank to do a credit check. Apart from this charge, the lender is not obligated to charge the borrower any fees.

    Borrowers are advised to go through the application form thoroughly and check for the clauses regarding refunds and applications fees before considering a switch just to be on a safer side.

    Interest Rates


    This might be the top reason why people consider a switch. Provide the potential lenders with all the details and express your primary motive to move to another lender.

    Check with the potential lenders if this is something that they can offer. Double check all the details to ensure that this is what you will be getting once a switch has been made.

    Speak To Current Lenders


    Speak to the current lender's office and express your intent to switch lenders. It is preferred if you get a written confirmation from the current lender who is processing your application to be sure that the ties with them are closed. This will ensure a smooth flow and will also remove any assumptions both parties may have. This will also give the borrower to move forward with other lenders confidently.

    Due to high competition, whenever a borrower expresses their intent to take their business elsewhere someone might contact the borrower to try to convince them to stay. They might even offer a good interest rate compared to the one they currently have and the very reason they want to switch mortgage lenders. This is a good opportunity for the borrower to express any concerns that they may have freely.

    Buying a home is one of the most important decisions and as this is a long-term plan making sure that you choose the right lender is extremely imperative. Proper care must be taken to ensure a smooth switch. All documentation must be read through properly. Any hidden or other costs must be discussed with the concerned parties.

    It is always advisable to speak to a knowledgeable broker who can provide valuable insight on current interest rates, debt to income ratio and other details. Please take the time to consult as this will save years of frustration later on.