Discover the steps required to refinance your home loan.
Interest rates are tumbling, the mortgage market is tight and lenders are hungry for your business. All this adds up to great opportunities to get a better deal by refinancing your home loan. So let’s take a look at what’s involved.
A key starting point is knowing your home equity – that’s the market value of your home less the loan balance. If you need to borrow 80% or more of your home’s value you’ll be asked to pay lenders mortgage insurance (LMI) even if you paid a premium when you first purchased the place. It’s important to ensure that the cost doesn’t outweigh the savings of refinancing.
Next, meet with your broker who can help you select a new loan and work out exactly how much you will save by refinancing.
Less paperwork for existing home owners
Once you’re ready to apply for a new loan you’ll need to gather the necessary paperwork. While there’s no need for evidence of savings you will still be required to provide personal ID (passport, drivers licence) plus proof of income – PAYG certificates or a copy of your employment contract, or several years of tax returns if you’re self employed.
Lenders will also want to see copies of loan statements demonstrating regular repayments.
A valuation is likely
Your new lender may request a valuation of your home, and a fee may be charged for this service. Be prepared to have to fork out the money for this service.
From here it’s a matter of waiting for lender approval. Once you get the green light your new lender will draft formal loan documents for you to review and sign.
The overall start to finish of the refinancing process can vary depending upon your current lender and the amount of time they taken to provide you with your mortgage discharge. Having a broker can help by giving your lender a gentle nudge to speed things up.