Can you change mortgage companies? A concise guide

There are many reasons to change your mortgage lender, from receiving poor customer service to simply wanting a lower interest rate. Thankfully, you can change mortgage companies once you’ve already started the process.

Learn more about swapping a mortgage lender for a different one and how it affects the purchasing process. Plus, find out how easy it is to refinance with Better and save money over the life of your loan.

...in as little as 3 minutes – no credit impact

Can you change mortgage companies?

Yes, you’re free to change mortgage lenders at any time. The process changes depending on what stage in the buying process you’re in:

— Haven’t signed closing documents: You’re free to walk away, even if you’ve already submitted a mortgage application and the lender has finished underwriting your loan.

— Under contract: You can also change mortgage lenders while under contract, but it may mean facing delays or additional fees.

— Already closed: If you’ve already closed on a home and later decide you’re unhappy with your current mortgage lender, your only option for switching is to refinance to a new loan to pay off the initial mortgage. The process is essentially the same as when you initially applied for your loan — fill out an application, go through a credit check, and share financial documents like proof of income.

When should you consider mortgage switching?

Here are a few scenarios where it makes sense to swap one lender for another.

You qualify for better loan terms

This is one of the most common reasons to move to a new loan provider. If your credit profile has improved and you think you can get a lower interest rate, smaller monthly payments, or a shorter loan term, switching lenders is a great idea. The same is true if you’re past closing and decide you want to refinance. 

In either case, it’s best to carefully calculate how much you expect to save before making the move. You may realize the savings aren’t worth the effort.

You’re dissatisfied with your lender’s customer service

Poor customer service is a dealbreaker for many borrowers, whether it’s an unexplained delay or slow response times. Reliable communication makes a significant difference and can be well worth the switch. At Better, we offer 24/7 support and guide you through every step of the mortgage application process so you never have to go it alone.

...in as little as 3 minutes – no credit impact

The fixed-term period is ending

If you have a fixed-rate mortgage period that’s expiring soon, refinancing lets you avoid the variable interest rate that follows. This lets you sidestep potentially higher rates in the future and create a more predictable budget.

You want to avoid prepayment penalties

Trading one lender for another can be a good idea if you want to pay down your loan faster without facing penalties. Some lenders charge prepayment fees, and switching companies lets you pay off your mortgage at your own pace.

Keep in mind that this only applies to switching mortgages before you’re locked into a final agreement. If you’ve already closed a deal, swapping lenders can trigger penalties, not prevent them.

What are the potential disadvantages of changing mortgage companies?

Going with a new lender isn’t always the best choice. Here are some of the main cons to consider.

You may need a new appraisal

Whether you’re changing lenders before closing or looking to refinance, the new lender may need a new appraisal to confirm the value of the home. Since borrowers are responsible for appraisal fees, you’ll have to pay a few hundred dollars to get this done.

It could delay closing

If you choose a new lender before closing, you’ll have to go through the entire loan process again. This can take weeks or even months, which may push the seller to cancel the sale or charge a daily extension fee.

You might pay higher closing costs

Even if the new loan comes with benefits like a lower interest rate, it could have substantially higher closing costs, which might offset the savings. You’ll need to closely compare your loan options, including charges like a new appraisal, to make sure you get the best price.

How can I change my mortgage lender?

Now, let’s go over how to change mortgage companies. Exchanging your loan for a different one will be a familiar experience because it’s essentially the same as your first application. Here’s how it works:

— Pre-approval: You’ll need to submit financial information to your new lender, like income, other assets, and existing debts. At this stage, you’ll get an estimate of the interest rate the lender is willing to offer you.

— Mortgage application: Here, you’ll provide more in-depth documents, like tax returns, pay stubs, and bank statements, so the lender can get a thorough understanding of your financial situation.

— Appraisal: The next step is an appraisal, which lets the lender know that the home’s value matches or is greater than the amount you want to borrow. The lender orders the appraisal, but you’re the one who pays for it. Appraisals typically cost about $400.

— Closing: Finally, it’s time to wrap up the loan. You’ll pay out the closing costs, sign on the dotted line, and officially assume the new mortgage.

When is it too late to change mortgage lenders?

You’re locked into the mortgage after closing, once you’ve signed the final loan documents. Before closing, you haven’t entered into the loan agreement, so you can simply cancel the mortgage and switch to a different financial institution.

However, it’s never too late to refinance and replace your current loan. This means you aren’t quickly switching — you’re paying off the initial mortgage with a new one. The outcome is similar, but the process is typically more complex and pricier. Fortunately, Better makes refinancing easier: Compare prices to find the best deal, estimate payments, and calculate a custom offer in minutes.

How to choose the right mortgage lender

Picking the right loan provider means balancing costs, customer service, and loan features that fit your financial goals. Following these tips can help you make the right decision:

— Work with a financial advisor: Financial advisors help you understand your financial profile and find out which lenders can offer you the best loan terms. Once you’ve gathered the offers, they can also help you compare them and discover your total expenses.

— Consider reputation and customer service: Learn if lenders treat their borrowers well by investigating real experiences. Visit review websites to see what people say about the customer service experience and how smooth the loan procedure is (or isn’t).

— Look for transparency: Make sure the lender provides a clear breakdown of costs and terms and doesn’t sneak in hidden fees. Request a detailed breakdown of costs and carefully examine them. This is easiest with a financial advisor’s help. 

— Shop around: Get preapproved by multiple lenders to see which company offers the best combination of low interest rates and overall borrowing expenses, like fees and closing costs.

Better offers competitive rates for both first mortgages and refinances. The application is fully online, and you can get pre-approved in as little as three minutes. When you work with us, you also get world-class 24/7 customer support right up to closing — which averages just 32 days, a full 10 days shorter than the industry average.

Refinance faster with Better

You’re never stuck with a mortgage that doesn’t work for you. Even if you’re already making payments, you can always refinance with a different lender.

When you choose Better, you’re choosing a trusted lender that makes swapping mortgages easier, more affordable, and much faster. 

It takes as little as three minutes to be pre-approved, and you could receive the funds in your account in as little as seven days.

...in as little as 3 minutes – no credit impact

FAQ

Can you change lenders while in underwriting?

Absolutely. As long as you haven’t signed the closing documents, you can move to a new lender any time you choose.

Is there a penalty for switching mortgage lenders?

Yes, you’ll often have to field some extra expenses when moving to a new lender. Before you finalize the mortgage, you’ll receive a loan estimate that clearly outlines closing costs and required lender fees so you can review the differences before you switch. You’ll also have to cover a new appraisal and credit check.

If you’re refinancing and your original lender charges prepayment penalties, you’ll incur these for paying off the first loan early. If you live in a state that requires legal closing fees, you’ll need to pay them again, too.