The benefits of refinancing your home loan can include more saving money on repayments, flexibility, accessing equity and potentially paying your home loan off sooner. Despite these attractive benefits, we’ve noticed that sometimes people can be reluctant to refinance. This is often due to them feeling like it will be ‘too much hard work’. With expert guidance and support, refinancing your home loan is a smooth and relatively painless process. Here we take you through the home loan refinancing process step-by-step:
Step 1 – Refinancing Consultation
The Refinancing Consultation is the first step in the process. We discuss your personal circumstances and your goals. It’s important to be clear on what you want to achieve from your refinance. For example: is your goal to save money on repayments every month or to use equity for renovations. Having a clear goal will help guide your decision around which home loan to choose. Our video on the benefits of refinancing your home loan will give you an idea of the types of goals you could set for your refinance. We then look at your current financial situation including:
- How much equity you have in your home
- Your employment
- Any liabilities you may have (e.g. expenses and debts)
This discussion gives us a clear picture of the types of mortgage refinance solutions that you’re likely to be eligible for, that will also meet your needs. The Refinancing Consultation usually takes about 30 minutes. We can chat with you over the phone, face-to-face in our office, or we can come to you.
Step 2 – Compare loans
The Refinancing Consultation gives us the information we need to start comparing home loans for you. We have access to 100’s of home loan products from dozens of lenders. Some of the lenders on our panel aren’t available to the general public. We also sometimes have access to special rates, and fee discounts or waivers. We search our database to find home loans with serviceability criteria you’re likely to meet and that will help you achieve your refinancing goals. We check your eligibility for various loans without it being recorded as a ‘credit enquiry’ on your credit report. This means our research won’t affect your credit score. We make a short list of appropriate loan products. When making this shortlist we also calculate switch costs and determine the break-even point of your loan switch.
Step 3 – You choose your loan
We then present you with a personalised shortlist of suitable mortgage refinance products. We explain the features, benefits and fees for each option. You then choose which loan you would like to apply for.
Step 4 – Submit paperwork
From here, we ask you to supply documents such as payslips and proof of identity. The documents you need to provide will vary depending on your circumstances and the lender’s criteria. We look after all of the paperwork for you. We package it up in a way that makes the lender’s assessment process as easy and efficient as possible. We know EXACTLY what each lender is looking for in an application. So, we will make yours as attractive as possible. We then get on the phone and let our personal contact at your chosen lender know that your application has been submitted. We’ve built relationships with contacts at all of the lenders on our panel. We find that this process, of carefully packaging your application and then calling our contact at the lender helps to speed up the application approval process.
Step 5 – Valuation
Once the lender has received your paperwork and decides to progress the application, they will organise a valuation of your home. Your home needs to be valued so the lender can determine the loan to value ratio (LVR) which generally needs to be 80% or less, to avoid Lenders Mortgage Insurance (LMI).
Step 6 – Lender processes refinance
Your new lender then contacts your current lender to arrange the terms of transferring the debt. This can take weeks during which time you will have to wait until your new loan is approved. As a result, the whole process usually takes up to 2 weeks In some instances, with particular lenders, the refinance can be ‘fast-tracked’ and completed within 72 hours. If you choose to ‘fast track’ your refinance, your new lender may ask you to pay title insurance. This is designed to cover them if there is a hiccup in transferring the title of the home from the old lender after the loan has been settled. Your new lender may offer to cover this expense in some circumstances.
Step 7 – Settlement
After the loan is approved, your new lender will contact your old lender to have the property title and debt transferred. This is the settlement process which can take a couple of weeks to be completed and there may be fees involved. We’ll always let you know upfront about any fees involved in the refinancing process.
Step 8 – Post settlement
Once the loan has settled any outstanding setup and discharge fees need to be paid. Some lenders will cover these fees. The fees associated with switching loans will be covered by your new lender and rolled into the total amount that you owe them. If these fees are left to be paid over the full loan term, they will cost you significantly more in interest charges. For this reason, making an extra repayment to cover any fees charged can be a wise decision. This mortgage refinancing process may seem daunting, however with expert support it can be quite seamless.
Step 9 – Review regularly
It’s important to keep an eye on interest rates, in case your lender increases rates on your particular home loan product. Ongoing rate watch is a service we offer for all of our home loan clients. We also recommend you review your home loan every 12 months. So much can change in a year, so you want to be sure you’re still getting the absolute best deal for your situation. Your credit rating may have changed, the amount of equity in your home will probably increase, and these things can increase your bargaining power. There are always new home loan packages on the market too. We regularly review our clients’ home loans for them, to be sure that they are still getting the best deal. If we find, there’s a better home loan out there for their circumstances we contact them to discuss the possibility of switching.
If you need a hand sorting out your home loan refinance, would like a home loan health check, or have any questions, please reach out. I’d love to help you and I’m only ever a phone call or an email away. You can book a free Home Loan Strategy Consultation with me here.