Does it feel like you were collating all your documents and filling out your home loan application a lifetime ago? If you’ve discovered that you’re eligible for a lower interest rate, or perhaps you simply wish to change lenders, it’s useful to understand how a refinance application differs from a home loan application.
Think back to your first day of university, TAFE or even your first proper job. You’re likely to have been given a bunch of new and confusing documents to fill out, before you even knew where to find a decent coffee. Then came your second year of study or perhaps you changed jobs for a better position. All the admin and paperwork? You already nailed it once, so doing it again feels a lot lighter and easier.
This is essentially what the refinancing process is like. A lot of the up-front hard work you need to do in terms of familiarising yourself with procedures, terms and definitions has already been done! (Go on, give yourself a pat on the back).
If you’re refinancing to take advantage of a lower interest rate, there’s quite a few things you can skip over this time around. For example, consulting a solicitor for a strata report and pest inspection or even deciding whether to go with a conveyancer, solicitor or both is not necessary this time around. There’s also less need for all those calls with your lender and real estate agent because you’re not negotiating on the price of your property, you’re simply switching to a different interest rate.
Refinancing doesn’t have to be a daunting process, but there’s still a few things you need to do. When that effort results in tangible savings on your mortgage repayments, it’ll be worth it.
When it comes to refinancing, your existing home loan statements and evidence of ownership are the holy grail. If you’re going with a new lender, these documents prove to your new bank that you’ve brought your ‘A game’ in the past when meeting loan repayments.
They also show what balance you have outstanding on your current loan. This is much simpler than the documentation and info required during the home loan application process, because the key objective in that case was proving to the bank that you have the funds for the purchase to begin with. With refinancing, you’re no longer starting from scratch.
Bear in mind that you’ll still need to provide recent payslips, any alternative income statements, identification documents and credit card statements, but you’ve done it before, so you shouldn’t have any problems!
Pro tip: If you have found a better rate with a new lender, you will need to factor in signing new mortgages and contracts as part of the refinance application process.
What you’ll need to think about is getting your property valued, which isn’t something you had to do when applying for your home loan. The good news: it’s usually arranged by your existing or new lender as part of the refinancing process and it’s an essential step to determine the Loan-to-Value ratio of your property, and your eligibility when it comes to refinancing.
Pro tip: If your property is in a metropolitan area, there’s a good chance your lender can quickly and independently access its value data without needing access to your property.
When you break it down like this, there’s no reason for refinancing to have any stigma or stress associated with it, especially if you’re going to be saving money with your new interest rate. Home loan application? In the bag. Refinancing application? Now that you’ve gained some solid pointers around how the process works, you can go after your financial goals with confidence.