How to Refinance Your Home Loan

To help you decide if the time is right for you to move on from your current rate or lender, we’ve laid out some steps to a successful refinancing.

Steps to Successfully Refinance Your Home Loan

1. Assess your current home loan

Assessing your current home loan is the first step to refinancing. As well as providing a benchmark against which to compare other offers, thinking about what you like and don’t like about how your loan is structured can make it easier to find the right home loan for your needs.

Here are some things to think about:

• Consider strengths. There may be things you like about your current lender –perhaps they offer a great online experience, or you like being able to access physical banks. Figuring out what works for you will help you to know what to look for in a new lender.
• Compare rates. Knowing your current rate gives you a benchmark to compare against.
• Know the types of interest. You might want to move from a variable to a fixed interest rate.
• Understand the options. You may wish to consolidate debt or access some of the equity you currently have in your home.

2. Compare home loans

Once you know what you’re looking for, you can start comparing home loans. You can do this online, or with the help of a qualified mortgage broker.

The benefit of working with a broker is that they will use their experience and market knowledge to find a home loan that is most suitable to your needs – and do all the legwork for you. Bear in mind that your broker may be able to offer more tailored recommendations if you can share your personal financial information, such as evidence of income, expenses and other financial commitments.

Even if you wish to stay with your current lender, it may be worth speaking to a mortgage broker, as they might be able to access a better deal for you.

3. Calculate costs

It’s important to research any fees you may need to pay to exit your current loan, and any upfront costs associated with your new loan. A mortgage broker can help you work out exactly what it will cost you to refinance your loan.

Fees may vary depending on whether you’re refinancing with the same lender or moving to a new one. If you’re staying with the same lender they may be able to waive some of the fees.

You can use a Refinancing Calculator to help you crunch the numbers.

4. Apply for your new home loan

Once you’ve chosen a new home loan, you will need to make an application to the lender. This can typically be done over the phone, in a branch or via your broker. If you’re using a broker, they can submit the application on your behalf.

The application process will vary based on whether you’re refinancing with your current lender or a new one.

If you’re refinancing with a new lender, they’ll need to make sure you can afford to meet your new loan repayments. That means you’ll have to provide your personal details and income information and have your credit record accessed, just like you did during your original home loan application.

The lender may ask for:

• Proof of identity.
• Full employment history.
• Personal details, including your date of birth and address.
• Details of any assets, existing debts and expenses.
• Superannuation details.
• Recent proof of income.
• Latest Notice of Assessment from the Australian Taxation Office, or if self-employed, three years’ worth of tax returns.
• Bank statements showing evidence of savings.

While it’s different for each lender, it generally takes around a week for the lender to process your application.

5. House valuation

Once your application has been pre-approved, your lender will need to perform a valuation on your property to work out how much it’s worth. The pre-approval process typically takes up to a week.

If changing lenders, your new lender will notify your current lender so they can transfer your information. This is when you will need to settle any exit fees.

6. Approval

When the application has been formally approved you will likely receive a mortgage contract pack from the lender. This will usually include:

• Mortgage contracts. This will be the actual contract verifying the loan amount and terms of the lending i.e. repayment type, term of loan, features, fees, etc.
• Direct debit form. This allows you to nominate which account your payments will be drawn from once the loan settles.
• Terms and Conditions booklet. This will outline the terms and conditions specific to your lender.
• Mortgage of Land forms. This is a government document that allows the lender to register their interest in your property/on your title to confirm the mortgage is held by them.
• Discharge form. Customers sign the discharge form to advise their outgoing lender that they are leaving.

Once the loan has settled, some lenders will also send the customer a ‘Welcome Pack’ confirming the new loan account details and internet banking set-up.

This is where it can be handy to have a broker, as it means you have someone to talk to and ask questions of to ensure you completely understand the documents that you need to submit.

Once you’ve signed the contract, settlement occurs and your old loan will be paid off with funds from your new loan.