Refinancing your home loan can be a little intimidating, especially if you are time poor or have never done it. If you are unsure of what refinancing is or what the benefits of home loan refinance are then read our article on what you need to know about refinancing a home loan.
How to Refinance a Home Loan?
In this article, we will break refinancing down into simple steps to help you understand how to refinance your home loan and give you a road map to follow. Here are 5 easy steps to successfully refinance a home loan:
- Assess your current home loan
- Compare home loans
- Calculate all the costs to refinance a home loan
- Gather documents, prepare paperwork and apply
- Discharge your old home loan
1. Assess your current home loan
Time to get your current home loans paperwork out and look at all the fine print, specifically what interest rate you are paying.
If you have an online-only account look for it in the ‘account’ section, or just give your lender a call to clarify. You also need to know all the ongoing fees you are currently paying, as well as any exit or discharge fees that apply.
2. Compare home loans
Now you can dive in and compare home loans. Thankfully there are tons of resources online, or you can talk to one of our refinance mortgage brokers and they can compare over 50 lenders for you which will make this less of a chore.
“When it comes to assessing loans, remember to keep an eye out for interest rates, annual and ongoing fees, loan features, as well as any other options that suit your circumstances”
When it comes to assessing loans, remember to keep an eye out for interest rates, annual and ongoing fees, features (offset, split and redraw facilities), as well as any other options that suit your circumstances. Also look out for ‘honeymoon’ rates – a low initial interest rate that runs for a year or two, but which switches to a much higher rate thereafter.
3. Calculate all the costs to refinance a home loan
Now you need to calculate all the costs – starting with all the fees of your current home loan.
Ongoing fees you could be paying with your current loan can be called “administrative” or “service” fees. They are annual fees you pay your lender. You may pay only $300 per year for a service fee, but over the course of a 30 year loan, this adds up.
Now identify all the up-front and ongoing fees of the new loan. Set up fees typically include an application or loan establishment fee and valuation fee to name a few. You can also use online mortgage calculators to help calculate your repayments when refinancing, and what you can potentially hope to save.
4. Gather documents, prepare paperwork and apply
You can now start to gather your documents and prepare your paperwork to apply.
Information that your new lender will require includes:
- Documents to confirm your ID, such as your passport and/or driver’s license
- Payslips/bank statements to confirm your level of income
- A list of your assets and liabilities
- Details of your current home loan and provider.
They are also likely to want to value your property to work out how much they are prepared to lend you.
Applications can be done online with many lenders, where you scan and attach all the documents, or you may have to post it all in. Approvals can take anywhere from minutes to hours and even days – it all depends on the lender’s process and procedures.
5. Discharge your old home loan
All that is left is for your new lender to do is discharge your old loan, which involves them exchanging all your details and transferring the title for you. This can take up to a couple of weeks, after which they pay your old lender the balance of your home loan.
“Discharging your old home loan can take up to a couple of weeks, after which they pay your old lender the balance of your home loan.”
Once the home loan refinancing process complete you are free to enjoy all the perks and benefits of your new home loan. For more help, you can also talk to Coronis Finance mortgage brokers now!
7 Steps To Refinancing Guide
Interest rates are constantly changing and if your wanting to potentially save thousands on your home loan, refinancing a home loan is your best option.