A Guide to Remortgaging your home loan

Byhomecircle.com.au

Remortgaging, also known as refinancing, is the process of switching your existing home loan to a new lender or a different loan product with your current lender. It’s a common practice in Australia, as homeowners seek to take advantage of better interest rates, access equity in their property, or consolidate debts. Here’s a step-by-step guide to remortgaging in Australia:

Evaluate your reasons for remortgaging

  • Lower interest rates: If market rates have dropped since you took out your home loan, remortgaging could save you money on interest payments.
  • Access equity: You may want to tap into the equity you’ve built up in your property for renovations, investments, or debt consolidation.
  • Change loan features: You might want to switch to a loan with more flexible features, such as an offset account or redraw facility.

Review your current loan

  • Check your current interest rate, fees, and remaining loan term.
  • Determine if there are any exit fees or break costs for switching loans.
  • Calculate how much equity you have in your property by subtracting the outstanding loan balance from the property’s current market value.

Research remortgaging options

  • Compare interest rates and fees from various lenders, including banks, credit unions, and non-bank lenders.
  • Consider different loan types, such as variable, fixed, or split rates.
  • Evaluate the features and flexibility of each loan option.

Prepare your application

  • Gather necessary documents, including proof of income, assets, liabilities, and identification.
  • Get a property valuation to determine the current market value of your home.
  • Calculate your borrowing power and determine how much you can remortgage for.

Apply for the new loan

  • Submit your application and supporting documents to your chosen lender.
  • Provide any additional information requested by the lender.
  • Wait for the lender’s approval and formal loan offer.

Settle the new loan

  • Review and accept the loan offer if you’re satisfied with the terms.
  • Arrange for the new lender to discharge your existing loan and transfer the remaining balance.
  • Provide the necessary documentation, such as the discharge authority and settlement statement.

Manage the transition

  • Cancel any automatic payments or direct debits linked to your old loan.
  • Set up new payment arrangements with your new lender.
  • Keep records of all documents and transactions related to the remortgaging process.

It’s important to note that remortgaging may incur costs, such as application fees, valuation fees, and legal fees. However, if you secure a lower interest rate or access equity for productive purposes, the long-term benefits can outweigh these upfront costs.

Before remortgaging, it’s advisable to seek advice from a qualified mortgage broker or financial advisor. They can help you navigate the process, compare options, and ensure that remortgaging aligns with your long-term financial goals.

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