In simplest terms, refinancing a home loan is taking out a new home loan to pay off an old home loan. There are a variety of benefits to refinancing a home loan. These include:
- You took out your current home loan when interest rates were high and wish to get a new loan at a lower interest rate.
- The monthly payments of your current home loan are too high and want to refinance to pay less each month so as to improve cashflow.
- You want to consolidate different debts into a single loan.
There are main steps someone must take if they wish to refinance their home loan.
Speak to Your Lender
If you want to change home loan options, before you try contacting other lenders, it would be worth it to contact your current lender. Telling them you’re unhappy with your current mortgage rate or plan and that you’re seeking to switch providers might be great motivation for them to get a better rate for you.
Otherwise, research and compare lenders and the home loans they have on offer, as many are more than happy to take in new customers by offering premium rates.
Fill Out Your Loan Application
Similar to when you first applied for a home loan, you’ll need to hand over all of your financial documents such as proof of income, contents insurance, proof of identity, debt statements, and your credit score.
Receive a Loan Refinancing Estimate
Within a few days of waiting, you should receive a loan estimate. This won’t count as a full loan pre-approval, but it will highlight the estimated interest rate, the monthly mortgage repayment amount, and any closing costs you need to be aware of. This is your opportunity to compare offers from different lenders and decide which one is the best fit for you.
Accept Your New Home Loan
Once you’ve found the terms of a new loan you enjoy, you can go ahead and accept it so you can switch from your current mortgage and into your brand new refinanced home loan.
The thing to note about home loans is that they can take anywhere from two days to six weeks to reach a refinance settlement date. We acknowledge that that’s a wide gap, and there are plenty of reasons someone would want to expedite the process. This can be because interest rates have suddenly dropped and you want to take advantage of the opportunity, or to ease the strain of loan payments sooner so you have better cash flow. Regardless of the reason, here are some tips on how to speed up the refinancing process.
Have All Your Paperwork Ready
Just like when you applied for a home loan the first time, lenders require a large number of documents, namely your income, assets, expenses, and liabilities. You’ll also need to include information about your existing home loans, most recent council rates notice, building insurance policy, and any council-approved plans if you’re refinancing to renovate any of your properties.
Asking your chosen lender in advance what specific documents they require can also insure that you give them everything they need right off the jump. That said, lenders have a tendency to spontaneously ask for further documents while conducting their application assessment. These are difficult to predict and can always lead to delays, so it’s best to stay prepared and check your inbox for communications often.
Have a Good Credit Score and Steady Income
If you have an excellent credit score, it will mean lenders will spend less time going through your bank statements. If you have a low credit score, you should spend three to six months prior contacting lenders improving your credit score. This can be done by making any home loan repayments and other debts on time, such as credit card debts. Having a steady income and regularly contributing it to your savings account is also a good sign of trustworthiness that lenders look for.
Ask Your Financial Broker About Any Fast Lenders They Know
If you hire a financial broker, they have a pool of lenders who they can sort through the average amount of time it takes for them to approve application loans. Reaching out to your broker is a great way to find out who can get your application processed the fastest. If you’re in need of experienced finance brokers and advisors, feel free to speak to us so we can match you with a lender that best suits your needs.
Need Refinancing Advice?
InFinancial services mortgage brokers have been in the finance and mortgage brokerage business for over two decades, meaning we have a wealth of experience in the home loan and mortgage market that we help our clients with. Here’s a glimpse of some of the expert advice we serve our clients with:
- Have 25+ years of experience helping first-home buyers, investors, and refinancers.
- We have access to over 30 lenders and can compare them to see which one best fits your refinancing needs.
- After getting an understanding of your goals and reviewing everything across your income, expenses, liabilities, et cetera, we deliver you a strategy roadmap.
- We take care of all the admin, which means after we’ve agreed on a lender from our pool, we lodge applications, liaise with the lenders, and manage all follow-ups.
- Help source all the necessary financial documents as part of the refinance application to ensure a smooth turnover.
Refinancing a loan can be an intimidating task, but it doesn’t have to be—let’s make sure you do it right.
