Are you thinking about refinancing your home loan? Before you take that important step, you must do your thorough research to make sure that your decision is right.
We will help you decide if it is the perfect time for you to move on from your current lender. Following are some major steps that you can follow for a successful refinancing.
Steps to Successfully Refinance Your Home Loan
1. Evaluate your current home loan
The first step to refinancing is evaluation of your current home loan. Also, providing a target against for comparing other offers, thinking about you liking and disliking about the way your home loan is structured makes it easier to find your ideal home loan as per your requirements.
Following are some things that should be considered:
- Contemplate the strengths. Obviously, there must be something that you like about your current lender. Maybe they offer you an exceptional online experience. It will help you identify qualities to look for in a new lender.
- Compare rates. Your current rate will give you a benchmark to compare against.
- Keep in account the kinds of interest. You may want to migrate from a variable to a fixed interest rate.
- Understand the available options. It is more likely that you want to merge debt or you may want to access some of your current equity.
2. Compare home loans
As you become aware of what you have to look for, you should then start comparing home loans. It can be done online, or a competent mortgage broker can help.
The biggest advantage of hiring a broker is that they have an extensive experience and in-depth market know-how, with this skill and experience they can find you, your ideal home loan according to your needs. They will do all the research and preparation for you. Moreover, keep in mind that your broker will able to give perfect recommendations only if you can share your financial situation and all the important information, for instance, evidence of a stable income, your expenses and financial obligations.
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
Calculating the costs is a crucial step. Before drawing conclusions one should always research about any charges that you may incur in order to exit your current loan and any other costs related to your new loan. Your broker can help you in this stage by finding out what will it cost you to refinance your loan.
The charges can vary depending on whether you’re refinancing with your current lender or considering a new one. In case you choose to stay with the same lender then you may waive some of the charges.
4. Apply for your new home loan
As you choose a new home loan, you will have to submit an application to the lender. Usually, it can be done over the call, via your broker or in a branch. However, if you’re taking the services of a broker, they can also submit it on your behalf.
This process varies on the basis of whether you’re refinancing with a new lender or your current one.
In case you’ve chosen a new lender for refinancing, they’ll have to ensure that you are able to pay your new loan repayments. For this, you will have to provide all your income information and personal details. Additionally, you will have your complete credit record accessed, similar to what that you did during your original home loan application.
Your lender can ask for:
- Details of your existing debts, assets and expenses.
- Complete employment history.
- Recent income proof.
- Your personal details, such as your address and date of birth.
- Superannuation details.
- Recent Notice of Assessment from the Australian Taxation Office (If self-employed then three years’ worth of tax returns)
- Bank statements for the evidence of savings.
Because the process is different for every lender, usually, it takes about a week to process your application.
5. House valuation
After the pre-approval of your application, your lender is responsible to complete an assessment on your property to find out its value and worth. This pre-approval process usually takes a week or less.
If you have taken up a new lender, they will have to notify your current lender for the migration of your information. That is when you will have to settle any withdrawal charges.
Once your application is officially approved, it is likely that you will receive a mortgage contract from your lender. This contract pack usually includes:
- Direct debit form. Allowing you to choose the account your payments will be drawn from after the loan settlement.
- Mortgage contracts. It is the real contract that verifies your loan charges and lending conditions, such as, term of loan, features, repayment type, and fees.
- Discharge form. Clients have to sign a discharge form to inform their lender that they are exiting.
- Terms and Conditions booklet. It highlights the terms and conditions particular to the lender.
- Mortgage of Land forms. It is an official government document allowing the lender to list their interest in your property to ratify that the mortgage is being held by them.
After the loan has been settled, some lenders may send a ‘Welcome Pack’ to their customer to confirm the internet banking system and new loan account details.
It is the process where it is convenient to hire a broker, as you will have someone to discuss and clear your queries to understand the documents to be summited.
After signing the contract, the settlement take place and your previous loan will be paid from your new loan.