How to refinance your home loan

Do you put off refinancing because it seems too hard? Often, buying your first home was such a process that the thought of refinancing seems like more effort than you have time for. Refinancing your home can be quick and easy. One easy option is to use a broker, they take care of the steps for you, saving you time. Plus, they have access to a wide variety of home loans. Here is what you need to do to refinance:

1. Decide what you need

Why are you refinancing? Is it to get a better interest rate or are you looking for more flexible options in your home loan? Maybe your life has changed or you want to consolidate debt. Be clear on reason for refinancing to ensure you get the right home loan for your circumstances.

2. Check costs

Mortgages often have an exit fee and new mortgages have a fee to set up. Find out the exit fee from your old lender and the new mortgage fee of any potential lender you plan to switch to so you can compare real costs and refinance with all the information.

3. Be aware of personal circumstances

Know your income, get a copy of your credit score, list your dependents, your liabilities and assets plus know the value of your property so you can determine the equity. All these things can affect your borrowing capacity, which home loan you are eligible for and your interest rate.

4. Select a mortgage

Using a broker makes this easier, but if you prefer to do it yourself you will need to compare home loans to find the one you feel suits your situation. Check interest rates, features such as an offset account, redraw option and all fees associated with setting up the mortgage as well as exit and other fees.

If you use a broker, they will take care of this part of the process for you, helping you narrow your choices based on the information you provide them.

5. Apply

Get all your paperwork in order including identification, proof of income, home loan statements if you aren’t refinancing with the same bank, a current payout quote listing all the fees and charges associated with refinancing then apply for the home loan.

6. Inform your lender

If you change your lender, you will need to let your current lender know so they can provide all relevant information to the new lender.

7. Pre-approval

Pre-approval is the step where the lender determines if you are eligible. You don’t need to do anything but wait. It can take a few days to a few weeks.

8. Valuation

For a lender to determine the loan to value ratio and ensure the property is valued correctly, they will arrange a valuation. The first is generally free, however, if you dispute the value they come back with or want another one, the fee is around $200 or more to have it valued again.

9. Approval and legally binding

Here you will be informed in writing of the approval of your loan. This can be followed by your lender or broker instructing a solicitor to prepare the loan documents on their behalf. Once the documents are prepared you can have your own solicitor review them or you can thoroughly review them yourself before signing.

10. Settlement

The settlement of your new and old loan will be arranged by your new lender. This includes an exchange of titles and the registration of your property and closing out the old loan.

11. Payment

Congratulations! You are all done. Now you will be provided with any details you need for repayments, your new account and other necessary details. Now you can relax.

While it might seem like a long process, most of the work is done behind the scenes by a broker or your chosen lender. The entire process can take a few weeks, longer if there are delays, but it can save you money and provide you with more suitable features for your home loan.

To discuss refinancing your home loan, chat to one of our expert brokers.

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