Why would a bank offer refinancing at a lower interest? Is any money saved at all, or is it just paid on a different timeline?
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Some Redditors appear to be assuming that a refinancing is inherently better for the lender over the long term. That’s not necessarily the case.
A lender would always prefer to have you paying an above-market interest rate on your loan, but that’s not entirely within their control. If market interest rates drop, you have the ability to seek replacement funding at lower, current rates (i.e, “refinance”).
Since a borrower is not limited to refinancing with their current lender, the borrower can shop around for the best rate they can find. If rates have fallen enough to offset the cost of refinancing, the current lender has two options: offer a current market interest rate to keep a customer’s business, or watch that customer refinance with a different lender at a better rate.
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