What happens when you refinance?


Is your current home loan not working for you? 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 an initial home loan application.

Refinancing is easier than purchasing

Getting your first home loan is an overwhelming process and a steep learning curve. Not only do you need to get your head around new terms like variable and fixed interest rates, principal and interest, offset accounts and so on, but you’ve also got to figure out which of these completely foreign concepts work for you.

Because you’ve already spent the time learning these new things, the refinancing process will be a lot easier, and you’ll have a better idea of what to look for in a loan.

You’ll need less external help

When you are applying for a loan to buy a new home, you’re doing the paperwork for both getting a new property and a new loan. If you’re refinancing to take advantage of a lower interest rate, there’s quite a few things you can take off your to do list.

For example, things like consulting a solicitor for a strata report and pest inspection, or even deciding between a conveyancer or solicitor may not be necessary this time around. There’s also less need to jump on 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 product.

A bit of paperwork

When it comes to refinancing, different lenders will ask for different documents. The good news is that this time around, you generally won’t need to provide quite as much. Some of the things you may need close to hand are your existing home loan statements (these show how much you owe and whether you’ve been able to regularly repay your mortgage in the past), evidence you own the property being refinanced, payslips (or other evidence of your income), credit card statements and ID documents.

At ubank, we may be able to make life easier and access some of this information for you through our partnership with Illion.

Get your property revalued

What you’ll have to do again is get your property valued. The good news: it’s usually arranged by your new lender as part of the refinancing process and is an essential step in determining the loan-to-value ratio of your property, and your eligibility when it comes to refinancing. If your property is in a metropolitan area, there’s a good chance your lender can quickly and independently access its value data without even needing access to your property.

When you break it down like this, refinancing is a straightforward process and is meant to relieve you of stress, especially if you’re going to be saving money with your new interest rate. Now that you’ve gained some solid pointers around how the process works, you can start your refinancing journey with confidence.