What is the refinancing process?

1. Understand your equity

A key factor in a refinance is your level of equity. It refers to the value of your property (which may have risen since you bought it) minus the amount you’ve already paid on your loan. Reviewing sales on similar properties in your area or using a professional valuation could guide you in the process and help you decide if you’re in the best position for you to refinance.

2. Work out the cost of refinancing

Refinancing can involve costs. You can use a loan refinance calculator to work out how much you might save, but to know whether it’s worth changing loans to get a better loan for you, take a close look at the terms of your current loan.

For example, do you have a fixed-rate loan and want to explore one with variable rates? If so, investigating whether there are fixed-rate break costs or similar charges may be an important consideration. Bearing in mind you may be able to balance that cost by taking out a new loan with a more affordable rate for you.

There may be other costs such as legal costs and application fees. (You can read more about refinancing costs here.) 

3. Compare home loans

Choosing a loan that’s right for you involves market research. It’s a good start to find a lender and refinance home loan rates you’re happy with. Another consideration is features. Could you use a linked offset account to help reduce the amount of interest you pay? Or an eco-pause option to redirect funds to environmentally-friendly home upgrades?

4. Get your finances in order

During a refinance, as with any loan application, your lender will want to get a snapshot of your current financial situation. Do you have a regular source of income, a consistent savings habit and sound budgeting skills? What are your credit card debts and limits like? Displaying evidence of good money management could boost your financial profile.

5. Sort out your paperwork

When refinancing your loan, you’ll need to provide your lender with paperwork to help with the assessment of your application.

As a guide:

• Personal identification documents
• Details of your job and income
• Information about your other assets and liabilities
• Terms and conditions of your current loan
• Property information to help with a valuation
  

6. Prepare your home for valuation

It’s possible that your home will be valued again as part of the refinancing process. This is so your lender can make an informed decision on your application and the terms of a new loan. Getting your home in good shape for an appraisal is something you may want to consider.

7. Apply for your new loan

If you’ve carefully compared your current loan with other options and found the deal you’re after, it’s time to apply. The application process varies between lenders. At Bank Australia we can handle your application online and by phone, or you can visit one of our branches.

8. Work out your repayments

It’s worth considering your method of repaying the loan as part of the refinancing process. If you decide to refinance at a lower rate but are able to maintain your current level of repayments, or even make extra payments, you could save money and decrease the amount of time it takes to pay off your loan.

After you’ve been approved for a new loan

If you’re switching lenders, your new lender can let your current lender know that you’d like to close your existing loan. A settlement date is decided and, from there, your new lender will pay out your old loan and set you up to start making repayments on the new one.

Keen to learn more?

At Bank Australia we’re here to help you with all the information you need about refinancing and choosing the home loan that’s right for you.