The common wisdom suggests that homeowners should reassess their mortgage options and consider refinancing approximately every three to four years. This periodic review of mortgage terms can help ensure that individuals always benefit from the best deals available.
The financial industry often sees new customers receiving more favourable interest rates than existing ones. In addition, the advent of refinance cashback and the possibility of waived application fees further bolster the case for periodic refinancing.
Refinancing your home loan is no longer a cumbersome process. Here is a typical walkthrough of the steps involved in refinancing for most borrowers.
Discern Your Refinancing Motivations Firstly, ascertain your reasons for opting to refinance. It could be to secure a lower interest rate, reduce monthly payments, or even tap into the equity of your property. Having clarity on your objective will streamline the process of identifying a suitable home loan product.
No Serviceability Required One of the leading lenders offers refinancing without serviceability requirements, provided you have a solid payment record over the past year. This kind of refinancing maintains your loan amount but with improved terms, such as a more advantageous interest rate. Eligibility criteria are provided.
Familiarise Yourself With Refinancing Costs Refinancing incurs several fees like mortgage discharge fees, application fees, valuation fees, mortgage registration fees, and ongoing lender fees. The aggregate of these can range from several hundred to a few thousand dollars.
However, the ever-competitive nature of the banking industry often leads to perks like lower interest rates, refinance cashbacks, and waived application or set-up fees.
Tip: Refinance cashback can help counterbalance the initial expenses of refinancing and offer a surplus.
Determine Your Equity Your equity is the difference between the market value of your property and the outstanding mortgage balance.
To calculate your equity, you can use our Home Equity Calculator. In general, a minimum equity of 5% is needed for refinancing, but ideally, it should be 20% to bypass Lenders Mortgage Insurance fees.
Arrange Your Documentation For refinancing, you’ll need to compile various documents such as home loan statements, recent council rates notice, building insurance on your home, unsecured debt statements, payslips, bank statements and IDs. Additional case-specific and lender-specific documents may also be required.
Consult Multiple Lenders Through A Broker Discuss your refinancing requirements and present situation with your broker. Brokers can suggest lender options that align with your needs and budget and let you know about any refinance cashback offers. As mortgage brokers, Home Loan Experts can assist you in navigating this process.
Organise Your Paperwork Once you’ve selected a lender, the application process echoes the one you underwent for your existing loan. There may be an application fee to cover administrative expenses.
Tip: Having your documentation ready beforehand will facilitate a smoother refinancing process.
Anticipate The Appraisal Some lenders may require a property revaluation. This may be a computer valuation (for metro areas and prime locations) or a full valuation.
Tip: Home Loan Experts can request a complimentary upfront property valuation with some of our lenders.
Receive Approval After the completion of the paperwork submission and home appraisal, your loan will close. The lender will provide you with a Closing Disclosure, which details all your mortgage information. The approval process can take 4-8 weeks, but you can cancel your loan at any time within the grace period.
Finalise Settlement If you’re refinancing with a different lender, your broker and new lender will notify your current lender about the discharge. There may be discharge fees, typically around $350, depending on the lender. After settlement, the new lender will pay off your old lender and transfer the mortgage.
Implement The New Loan Having successfully refinanced your home loan, you’ll receive a welcome letter outlining the interest rate and repayment terms, among other things.
Our customer care team at Home Loan Experts will ensure everything is set up for you.
The refinancing process can take up to a month, but with the fast refinance option offered by some lenders, this time can be cut to just a couple of weeks. Always make sure to make your repayments on time and check your credit file to make sure it’s clear before beginning the process. It’s also worth calculating your comparative savings by considering the total cost of the loan, including costs.