A step-by-step guide to refinancing

If you've been thinking of refinancing your home loan, but don't know where to start, here's a step-by-step guide to help you.
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Step 1: Know why you're refinancing 

There are a number of key reasons to refinance a home loan: 

  • You might want a better interest rate 
  • You might want to pay less in fees
  • You might want to make more frequent repayments 
  • You might want to consolidate debt into one home loan 
  • You might want to refinance to a faster and more innovative lender 

Knowing what you want from a home loan lender should be the first thing you ask yourself, as the answer to this question can help narrow your decision.

loans.com.au has some of the most competitive interest rates in the country and is also a fast, entirely-online lender, so switching to loans.com.au could be a wise financial decision. 

Step 2: Crunch the numbers

There isn't much point to refinancing if you're not going to save money in the long-term. Use loans.com.au's home loan comparison calculator to work out how different your ongoing and total repayments will be over the life of a loan.

Also, take into account that refinancing often requires an amount of equity in your property to act as a deposit. The amount required is usually about 20% - the same as a deposit - and equity less than this amount might mean you have to pay Lenders Mortgage Insurance (LMI).

Refinancing can also come with a range of costs, such as:

  • Upfront fees on new loans 
  • Exit and discharge fees
  • Valuation fees

These costs should be factored into your final decision. 

Step 3: Choose your home loan and speak to a specialist 

A good home loan lender will have specialists on hand to speak to you and answer your questions about what the right home loan is for you. These specialists should be able to answer questions like: 

  • What interest rates are available on their loans?
  • What are the steps to get you a new loan?
  • Which loans have useful features? 
  • How does their application process work? 

loans.com.au has home loan specialists with years of experience to help guide you through the process. 

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Step 4: Begin your application 

Once you've chosen your loan, it's time to begin your application. You can usually do this online, and you will typically need the following documents: 

  • Your last two payslips if employed
  • The last two years of tax returns if self-employed 
  • Three months of bank statements
  • Evidence of any rental income
  • Six months of statements for your current home loan
  • Three months of statements for any loans you are consolidating i.e. credit card debt
  • A copy of your current Rates Notice and evidence of payment
  • Personal ID

Having these documents on-hand will make your application smoother and easier. If you're refinancing with loans.com.au, we have a process called FastTrax Refi. We pay out your current lender quickly and you don't have to contact them, we will do it for you.

Step 5: Prepare for a property valuation 

When refinancing, most lenders will arrange for your property to be valued, even if you already had one done when you first took out a home loan. Another property valuation might mean your property has increased or decreased in value, which can affect how much equity you have. 

Step 6: Loan approval 

Once your property has been valued and your documents have been inspected, the lender will then perform a credit assessment. If your credit history is satisfactory, then they will approve you for a loan. If not, you might be rejected, or might not qualify for your first choice loan. 

Once you've been approved, the lender should send through a mortgage contract package, which usually includes:

  • Mortgage contracts
  • Direct debit forms 
  • Terms and conditions booklets 
  • Discharge forms 
  • Mortgage of land forms 

Some of these things can be taken care of online. You then have to sign your mortgage contract and other loan documents and return them to your new lender. 

Step 7: Settlement 

Once all this is taken care of, your new lender will then arrange to pay out your existing loan with your now-old lender. From that date, you no longer have to pay your old lender interest, even if they take their sweet time with discharging the loan. 

When settlement is complete, you now officially start making repayments to your new lender. 

Step 8: That's it

You've now refinanced your home loan! This whole process can take about three weeks with smaller online lenders, compared to about 6-8 weeks with more traditional, larger banks. Refinancing can be a bit of effort on your behalf, but the benefits are tangible, and the right lender will take a lot of the work out of your hands. 

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