When you own a home with a mediocre mortgage rate it can be difficult to decide whether to stick with the current loan or refinance. After all, refinancing may get you a lower interest rate and lower monthly payments, but it can cost you on the front end with closing costs and other fees.
A better interest rate often translates to a lower monthly payment, but it can be risky for some borrowers, especially ones with bad credit or too much debt.
It’s important to take a look at the whole picture to determine whether refinancing is a viable option for you. Do your research, know your financial situation and find the best refinance lenders can mean the difference between top-notch rates, terms and service or getting a raw deal.
The 5 best mortgage refinance companies of 2020
- Bank of America — Best for low 15-year fixed APR
- Santander Bank — Best for low 30-year fixed APR
- Rocket Mortgage — Best for fast refinance mortgages
- American Federal Mortgage Corporation — Best for private, direct lending
- Third Federal Savings and Loan — Best for low 10-year fixed-rate APR and minimal fees
- Raymond James Bank — Best for flexibility
|Lender||APR||Origination Fee||Minimum Credit Score|
|Bank of America||3.780%||$845-$1,510||600|
|Rocket Mortgage||varies||flat rate based on loan size||580|
|American Federal Mortgage||varies||none||580|
|Third Federal Savings and Loan||3.66%||as low as $295||varies|
|Raymond James Bank||4.219%||none||580|
Bank of America — Best for 15-year fixed APR
Bank of America offers three mortgage refinance options: 15-year fixed, 30-year fixed and 5/1 adjustable-rate mortgages with some of the most competitive rates around. Although mortgage rates fluctuate, its 15-year fixed-rate mortgage is highly competitive among other top picks. It also offers a cash-out refinance option to homeowners who have sufficient equity. Qualified borrowers with equity may be able to refinance and borrow more to pay off other debt. However, remember that it also means a larger loan in the end. Although this option might be good for those who are trying to get out from beneath high interest, it can be risky for others.
Santander Bank — Best for low 30-year fixed APR
Santander is one of the largest retail and commercial banks around. It offers fixed-rate, adjustable-rate and special mortgages for homeowners who want to refinance. Fixed-rate mortgages come in 15- or 30-year terms, and its 30-year term comes with one of the lowest in this category. ARM mortgages are available on 5/1, 7/1 or 10/1 terms. ARM mortgages have lower initial rates that remain fixed for the first 5, 7 or 10 years of the mortgage, and then rates adjust annually.
Santander Bank also offers special mortgages, including government-backed FHA and VA mortgages. None of this lender’s loans have origination fees, but it does offer a points buy-down system that allows you to buy one point for 1% of your loan. Each point can reduce your interest rate by 0.08% to 0.25%.
Rocket Mortgage — Best for quick closing
Rocket Mortgage is a product of Quicken Loans that was designed to streamline the mortgage, or mortgage refinance, process and shorten the time from initial application to closing. Closing on a refinance generally averages about 48 days, according to Realtor Magazine and the National Association of Realtors, but Rocket Mortgage is often able to push closing through more quickly, in part because Quicken Loans owns its own title company.
Pre-qualifying with Rocket Mortgage is fast, easy and painless, and you can usually pre-qualify in as little as 10 minutes. You’ll need to verify employment, income and other vital pieces of personal information over the phone with a loan specialist to move forward with your loan, but this process can usually be completed the same day. Funds can usually be disbursed in about 10 to 35 days, depending on the timeline for the appraisal process and other requirements.
Third Federal Savings and Loan — Best for low 10-year fixed-rate APR and fees
Third Federal Savings and Loan serves borrowers across 25 states and the District of Columbia and has maintained a 5-star Bauer rating for 25 years. Part of what makes this bank a top pick is that it offers some of the lowest 10-year fixed-rate refinance rates around — which currently starts at 3.02% APR. It also has less stringent requirements for private mortgage insurance, which is usually required unless you have a 20% down payment to put down. Third Federal only requires PMI if you have a down payment of 15% or less.
As with other lenders, there are closing costs to consider, but they can be as little as $295 for all of its smart ARM and 10-year fixed-rate loans, and all of the loan costs bundled into one convenient fee. That’s significantly less than the standard 1% or more of your loan charged by other lenders. Furthermore, many lenders will offer a 30-day rate lock, but Third Federal ups the ante by offering you a 60-day rate lock.
American Federal Mortgage Corporation — Best for private direct lending
American Federal Mortgage is a private direct home mortgage lender. One thing that sets American Federal Mortgage apart is its application review process. You can submit a mortgage refinance application online and get an answer in as little as 24 hours because it uses computerized underwriting to streamline the approval process.
Another unique feature of American Federal Mortgage is its corporate incentive program. If your company is a member of this program you may be able to get a mortgage discount, plus there are no application or origination fees and the appraisal fee is refundable.
Raymond James Bank — Best for flexibility
Raymond James Bank is headquartered in St. Petersburg, Florida, but the lender serves the entire nation when it comes to mortgage and mortgage refinancing. This lender is known for taking a holistic, client-focused approach to finance and prides itself on its dedication to offering customized solutions to its customers. The lending process with Raymond James Bank offers a great deal of variety in terms of mortgage types. It has 15- and 30-year fixed-rate mortgages, government-backed fixed mortgages with 30-year terms and a range of ARM mortgages with terms ranging from 5/1 to 15/1.
What is a mortgage refinance company?
A mortgage refinance company is a lender that offers refinancing solutions to homeowners who want to change the interest rate or term of the loan on their house. Many financial institutions that offer mortgages also offer refinancing products, but brokers don’t usually issue loans directly and instead serve as intermediary between you and the lender instead.
It’s important to know the rates you qualify for and the fees that might be assessed before going forward with refinancing. Each lender differs. Some charge a loan origination fee, and interest rates vary by lender, mortgage, your location and other factors. The rate you qualify for with one lender might differ from another.
How should I choose the right mortgage refinance company?
You’ll want to take steps to maintain a healthy credit score and history before choosing a refinance company. Pay bills on time, limit new debt and pay down old debt. The higher your credit score and lower your current debt-to-income ratio, the better the rate you’ll qualify for.
It’s equally important to do your research when choosing a lender. Look at the lender’s reputation. Are they listed with the Better Business Bureau, the National Association of Mortgage Brokers or the Mortgage Bankers Association? Check the rates and the fees the lenders charge. Never go with the first lender you find. Shop around because you might find a better rate elsewhere, and that generally translates to a lower monthly payment.
The bottom line
When shopping around for a mortgage refinance lender, make sure to consider the rates offered, fees involved and any minimum credit score requirements, but don’t stop there. Not all mortgage lenders are created equal. Make sure the lender has a good reputation, not just the lowest rates. You can start by checking with the Better Business Bureau or other consumer review sites.
Before closing on your refinance mortgage, be sure you understand what your mortgage terms are. Talk to your lender and don’t hesitate to ask questions. It’s far better to close with a clear understanding of your refinance loan than be stuck with a product that doesn’t work for your needs.