Out with the old, in with the new – refinancing can be a great money-saver. Replacing your existing loan is a chance to lock in a better interest rate, and features you actually need. However, it can be a bit of a process, so you’ll want to know exactly what you’re up for before you start.
Sit back and relax. Here are all the steps you might need to take to get your refinancing sorted.
1. Understand why you’re refinancing.
If you’re thinking about refinancing, there’s clearly something missing from your current loan. What’s your motivation? Common reasons for refinancing include:
- securing a lower interest rate
- finding features that help you pay down the loan faster
- consolidating debt
- accessing home equity.
Are you just looking for a better rate without the bells and whistles, or would you prefer features and flexibility, like offset accounts, or the option to split your loan between variable and fixed rate? Knowing exactly what you want will make it easier to find the best new loan for you.
2. Compare home loan options.
If you’re making the effort to refinance, you’ll want to shift to the loan that best suits your needs. Use our refinance calculator to run your numbers, then speak with a ME mobile banker, or mortgage broker to determine which loan is right for you in terms of the rate and features. Make sure you’re comfortable with your choice of lender before you apply or transfer your home loan to another bank – making too many applications to multiple lenders can damage your credit score.
This might include getting answers to questions such as: What are the new conditions of your loan? Are there any features you won’t have anymore? How long does settlement take when refinancing?
3. Crunch the numbers.
Refinancing can come with a range of costs, so it’s important to factor this in when deciding to refinance.
Some costs to consider include upfront loan fees, exit or discharge fees on your old loan, Lenders Mortgage Insurance (LMI), and mortgage registration fees payable to the state government.
It’s also good to look at how much interest you’ll expect to pay across the lifecycle of your new loan compared to your current loan.
Once you have all the figures available, crunch the numbers to see whether the benefits of refinancing will outweigh the costs.
4. Apply for your new loan.
Who doesn’t love forms? Refinancing means applying for a whole new home loan – which means completing the paperwork just like you did for your current loan.
You’ll need to provide proof of income (usually a couple of recent pay slips), as well as personal ID. And because you’re already paying off a loan, the new lender will want to see up to 6 months of statements for your current loan.
Before you put refinancing in the too-hard basket, there are people that can help. A ME mobile banker can help you complete the paperwork and streamline the process.
5. Prepare for a valuation.
If you’re refinancing a home loan, it’s likely the new lender will want to value your home. Make sure you understand how the valuation works and what to expect. Some lenders operate using an automated valuation model (AVM), which means they won’t physically inspect the property, while others will want to assess in person.
If your lender needs to physically inspect the property, allow time to spruce things up before it’s assessed, even if that’s just planting some new flowers or painting a unicorn on your letterbox. There are lots of small things you can do to maximise your property’s market value.
6. Sign on the dotted line.
If your application is approved, formal loan documents will be drafted and forwarded to you for signing. Be sure to read the paperwork carefully, and speak with your solicitor, mortgage broker or ME mobile banker if you have any questions.
Behind the scenes, your new lender will get in touch with the old lender to organise the loan changeover.
7. Enjoy your new home loan!
Hooray, your refinancing loan is ready to go! On settlement day, your new lender will receive the title deeds to your home (previously held by your old lender), and the old loan will be paid out. All you have to do is enjoy a better loan than before (and keep making repayments).
Refinancing is generally a straightforward process, especially if you’ve got all your paperwork on hand and have been keeping up to date with your current loan. With these home loan refinancing tips, you could be rocking a new loan within 4 – 6 weeks, pain-free.
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Thinking of refinancing your home loan, but not sure where to start? Our ME Mobile Bankers can help you understand your options, speak with one of our home loan experts today.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.