How To Refinance Your Home Loan

By Matthew Kenworthy | Refinancing

The refinancing process is generally straight forward and simple. For most of my clients it’s a far simpler process than buying the house in the first place.

Determine Why You’re Refinancing

There’s a number of good reasons to consider refinancing your home loan such as:

  • Save on interest repayments
  • Current lender is giving bad service
  • Looking to consolidate debts

Seeking a better interest rate is the most common reason for switching lenders. If this is your primary motivation make sure the difference in rate is worthwhile.

For more detailed information on determining your reasons I recommend reading through ‘When to Consider Refinancing Your Home Loan‘.

Research Your Home Loan Options

An experienced mortgage broker can discuss with you your reasons for refinancing, look at your situation and requirements and show you potential options that meet your objectives. Personally I perform this service free of charge at no cost to my clients.

When meeting with a client I always try to show at least 3 options that meet their objectives. I discuss the pros and cons of each loan product so that you can make an informed decision about who you’d like to borrow from.

Alternatively, you can research your own options by calling banks and researching online. If you prefer to do it yourself be aware that if a lender performs a credit check on you it can potentially hurt your ability to get a loan approved with other lenders.

A good mortgage broker can save you considerable time and effort. For certain clients extra discounts above the advertised rates can also be negotiated on your behalf.

Loan Application

Once you’ve chosen your home loan lender & product an application for finance will need to be made. You’ll also need to provide the necessary documents to support your application.

Documents required will include (note: requirements vary from lender to lender):

  • Proof of Income: Usually payslips or tax returns if self employed
  • Current Home Loan Statements: Lenders will look to see that you’ve been making repayments on time on your current home loan.
  • Statements on Other Debts: If you’re looking to consolidate debts they’ll need to see statements on these debts also. Some lenders will also request statements on debts not being refinanced.
  • Identification Documents

Loan Assessment

At this stage the lender will assess your application to make sure they’re willing to lend you the money. This will include conducting a credit check, reviewing your documentation as well as valuing your existing property.

Depending on the value of your property relative to the amount of funds borrowed it may be worthwhile trying to order a valuation before submitting the application.

If the property value is too low it may mean refinancing is not worthwhile (due to lenders mortgage insurance premiums) or possibly kill the application entirely. A mortgage broker will often be able to order free up-front valuations if this is likely to be an issue.

Sign Documentation

Once the lender has approved your loan application they’ll issue your loan contracts and mortgage documents. They will also send instructions for discharging the mortgage from your current lender. When the documents are received they’ll need to be signed and returned in order to be processed by your new lenders settlement department.

Settlement

Once the paperwork is all in order your new lender will arrange to settle on the refinance with your outgoing lender. At this stage it’s time to sit back and wait for your new loan to be funded.

Once settlement occurs it’s time to enjoy the interest savings, better cash flow from paying off your debts or better lender service.

It all depends on what your original reason to refinance was!

Have any questions? Simply click the button below and we’ll get back to you with answer as soon as we can.

About the Author

Matthew Kenworthy is a specialist in all aspects of Residential & Commercial Finance. He can assist all borrowers from First Home Buyers to Property Investors with Large Portfolios.