With a home loan, clients tend to just ‘set and forget’. But it’s sensible to review your home loan every two to three years. Life happens and our circumstances are always changing where interest rates can go up and down, new lenders emerge and more competitive products become available so keeping the same home loan for 30 years could cost you more money than you need to spend.
Your mortgage broker can do a full home loan health check for you and will generally cost you nothing and find the right loan with a competitive rate. When meeting with your mortgage broker, be aware of what you want to be checked. Here are some questions that you may want to ask:
- Am I paying an unreasonably high interest rate?
- Am I paying high fees?
- Am I happy with the service I receive?
- Does my loan give me the features I need?
- Am I paying for features I don’t use?
- Have my financial circumstances changed?
In this article, we provide the process to refinancing your home loan, breaking it down into simple layman’s terms. But before we get into that, let us clear up a few common questions about refinancing.
WHY should you consider refinancing?
In general, there are four main reasons to consider refinancing.
- Your loan may be less competitive, and you could potentially get a lower interest rate.
- Different home loan features and benefits could work better for you.
- Your financial situation may have changed.
- You want to access some of the equity you’ve built up in your home.
WHEN should you consider refinancing?
We’re currently experiencing a low interest rate period, so there are many competitive home loan products available. It’s a good idea to review your home loan every two to three years.
WHO should you use to refinance?
You should always talk to a mortgage broker because our opinion is not biased towards any particular lender or product. (Unlike a bank which will push whatever loans they have to sell at the time.) And we won’t suggest that you refinance if it isn’t the right move for you.
WHAT is the process to refinance?
We’ve explained the when, who and what of refinancing, but what’s the actual process involved? Here’s a simple step-by-step guide.
Step 1: Speak to us
Before we begin exploring your loan options, it’s important for us to have a sound understanding of where you’re at financially and what you’d like to achieve. We’ll start by reviewing your current home loan and compare it with others in the market. This is the time when we help you decide if it’s the right time to refinance your home loan and what features may be beneficial for you.
Step 2: Choose your mortgage and apply
You may opt to stay with your current lender by negotiating for a better rate or changing to an alternative product; or refinance by switching to another lender offering a more competitive rate or loan features to suit your current circumstances. We’re here to help you find the right home loan to fit your personal goals and objectives. Then we’ll submit your application.
Step 3: Get your valuation
Your new home loan provider will require a valuation on your property as part of the application process. Keep in mind that their valuation might be more conservative than the market value you estimate.
Step 4: Get approved
Within a few days of submitting your application, it’s likely our inbox will light up with that delightful email confirming you’ve been approved for your new home loan. Yay!
Step 5: Your old mortgage will be closed
Your broker will arrange for you to complete a ‘discharge authority’ form. Your current lender will then provide a payout figure. Your new lender will fund your loan to pay out your current loan provider. If you’re refinancing to consolidate other debts, for example, credit cards or personal loans, these will be finalised with the proceeds of your new loan at the same time.
Step 6: You start afresh!
Once you have your new home loan in place, you will begin making repayments. If you need any help managing your new home loan, we are always here to lend a hand.
We hope you’ll find this guide to refinancing handy, and we would love to help you decide whether refinancing is the right step for you. The current COVID-19 pandemic has produced record low rates so now is good time for us to the review your home loan with you. We can help you explore your options and walk you through the process. Get in touch today, you never know how much you could be saving.