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What Is A Home Loan Refinance?
Refinancing is when you get a new loan to pay off your old home loan. You can do this with your current bank or a different one. If you’re looking for a lower interest rate, it’s smart to look at your current home loan before refinancing. This is especially true now because some banks are offering cash back and waived application fees if you refinance.
The refinance calculator helps you determine how much money and loan-term time you could potentially save if you switched home loans.
First things first, you should have a clear understanding as to why you’re refinancing; be it to access a better interest rate or to reduce your monthly repayments, or to access some equity from your property. Knowing this upfront will make it easier for you to identify the outcome you desire and the home loan product that’s suitable for you.
There are a number of fees you need to consider when refinancing such as mortgage discharge fees, loan application fees, valuation fees, mortgage registration fees, ongoing lender fees etc. The refinancing fees vary depending on the lender you apply with, and the product you qualify for. However, banks are always competing against each other to attract good borrowers with lower interest rates, refinance cash backs, waived loan applications and set up fees.
Your equity is the difference between your property value and the mortgage balance owing on the property. You can use our Home Equity Calculator to calculate your equity. Generally, to refinance you’ll need minimum equity of 5%; however, ideally you’ll want at least 20% equity so as to avoid Lenders Mortgage Insurance fees.
When refinancing, you’ll be required to provide your:Last 6 months home loan statements which show the total amount owing to the bank. Recent council rates notice and building insurance on your home. Last three months’ unsecured debt statements such as credit card statements, personal loan and car loan statements etc. You’ll also need to provide your 2 most recent payslips, bank statements and IDs. There’s usually a few additional case-specific and lender specific documents as well.
You can shop around and compare home loans yourself. But as mortgage brokers, we have access to a broad range of lenders – 40 lenders in our case – as such we can help you find a good deal and a good rate based on your situation.
Once you’ve lodged your application, you can expect to obtain a conditional approval between a day and seven business days based on that particular lender’s turnaround time.
Fortunately, for properties in metro areas and prime locations, a lot of lenders will accept a computer valuation of the property. As for properties with no recent data or for very high loan to value (LVR) loans, lenders may insist on a full valuation of the property. This usually takes around three to five business days.
The lenders will send you the Loan Offer documents, mortgage discharge forms, Titles Office – Mortgage Discharge etc. for you to sign. For the mortgage discharge, you’ll need to download the latest mortgage discharge form from your existing lender’s website and submit.
From here on out, much of the work is handled by your new bank or lender. They will contact your existing lender and pay out the balance, and remove the outgoing financial institution’s (OFI) name from the mortgage.
Finally, once the settlement is complete, some lenders also send a Welcome Pack, which will outline your new loan details, and internet banking setup. This is where you’ll want to ensure that any loan features that you require such as offset accounts, redraw etc. are set up at this time.
