There are many reasons you might be considering refinancing including; reducing your home loan repayments, your fixed rate might be expiring, consolidating your debts, plans to renovate or quite simply, your circumstances have changed.
For whichever reason you want or need to refinance your home loan, here’s how to do just that in five steps.
1. Review your home loan
Before refinancing your home loan, take the time to review your current home loan and note what you do and don’t like about your current set up. Are there features you couldn’t live without? Or features you know you’re missing out on? What is your current interest rate and what fees are you paying each month? Do you have a fixed or variable rate?
These are all important questions to ask so when it's time to compare home loans, you know what you want and what to look out for.
Beyond the features of your home loan, there could be other factors you both like and dislike about your current home loan provider. Maybe they have a great home loan product but you’re keen to combine all your banking with the same financial institution. Or maybe you’re considering changing to a company that shares the same values as you. Think about what your lender can provide you outside of your home loan service.
2. Compare other home loans
After you’ve reviewed your current home loan, take the time to see what else is out there in the market. When comparing home loans, on top of interest rates, keep other features in mind such as the ability to access extra cash if you’re ahead in your payments, the option of an offset account and freedom to make extra repayments. It’s also important to check what ongoing fees you could be signing up to.
If after all your research you’re happy to stick with what you’ve got, it could still be worth doing a home loan health check with your Home Loan Adviser, particularly if your loan hasn’t been reviewed for two years, your property has changed in value or your financial position has changed.
3. Find out the costs
Before submitting your application, it’s a good idea to calculate the costs involved. Firstly, find out from your loan provider if there are any costs to exit your current loan. You’d hate to get caught by surprise so it’s also important to chat to a Home Loan Adviser about any extra charges you may need to pay as part of your new loan. This could include application, settlement and valuation fees.
One of the reasons you might be considering refinancing your home loan is to reduce the cost of your repayments. Consider using a home loan calculator to figure out how much you will be paying each month.
4. Submit an application
Once you’ve found a new home loan, it’s time to submit an application. You can do this online, in branch or with a lending specialist. If your lender has mobile advisers, they may be able to come to your work, home or another place that suits you to make the process easier for you.
As part of the application, you’ll need to provide similar information to when you first applied, including details about who you are, what you earn, what you owe and what you own. Your lender will also need verification documents such as payslips and bank statements.
As part of the application process, your lender will perform a house valuation to determine its worth. You’ll also need to sign a form giving your new lender permission to manage the refinance process with your current provider.
5. Tick of approval
If you meet all the criteria and your application is successful, your home loan will be approved, and you will likely receive a call sharing the good news, followed by a formal approval letter. All the relevant lending documents will be provided including your contract. Once you’ve signed the contract, the settlement will happen, and your previous loan will be paid off by your new loan. Congrats – not quite as exciting as the day you bought the house but still exciting, nonetheless.
Any views expressed are the views of People’s Choice Credit Union solely. This information must not be relied on as a substitute for financial planning, legal, tax or other professional advice. Any financial product advice in this material has been prepared without taking account of your objectives, financial situation or needs, so before acting on it you should consider the appropriateness of it having regard to those matters. Before acquiring any products from us you should read our disclosure documents and terms and conditions which are available on our website.