If done properly, refinancing your current home loan can save you thousands of dollars over the course of your loan in repayments.

To find out how to get more out of refinancing your home loan follow this guide by Loanbrite.

According to the Australian Bureau of Statistics, around $4.6 billion of home loan’s were refinanced in just April 2014 alone.

How to Refinance your Home Loan?

Refinancing is simply moving your home loan from one lender to another lender. You may refinance your home loan to get a lower interest rate, pay less account fees, add a feature to your home loan like an offset account or take advantage of refinance offers*.

Many Australian’s refinance their home loans during the term of their home loan with the major reasons being:

• Getting a better rate or deal
• Cashing out/releasing equity to purchase an investment property
• Consolidate existing debts such as credit cards & personal loans
• Home renovations
• Features such as flexible repayments or account splitting
• If you are coming to end of your fixed term its usually a good time to see if you can get a better interest rate

It is a good idea to review your home loan from time to time to make sure it still has all the features you require and helping get to your financial goals sooner.

Step 1 – Look at the costs & your options

Speak with your mortgage broker to find out what the exit fees on your current home loan are. They can help you weigh up the setup/settlement fees of the new loan and run a calculation on how long it will take you to recoup the costs of the fees by lowering your repayments.

Home loan market is a very competitive one, it may be an option to see your current lender first and they could also give you a rate discount or a better deal.

If it looks like it may take you several years to recoup the costs of refinancing it may not be an ideal time to refinance if you are looking for a lower rate

Step 2 – What options or features would you like with your new loan?

Will a redraw account where you park your savings bringing down your interest payments be enough?

Maybe its in your best interests to have an offset account. One where you can have your weekly salary credited to coupled with a credit card can help you save 30 days worth of interest payments. By paying all your expenses on your credit cards interest free term while your money is offsetting the interest repayments on your loan.

Step 3 – Apply for new home loan

This process is similar to when you first applied for home loan. Your mortgage broker can do all the leg work and get the application process ready. You will still have to supply your most recent payslip, tax returns if self-employed and 6 months current home loan statements.

You will need to ensure you have had good conduct and there is no arrears on current home loan. Otherwise you may have some trouble getting approved or placed on a higher interest rate. Here is blog post about tips on getting an approval from a lender.

Step 4 – Tell your current lender your leaving

Your mortgage broker will help you fill out and submit your discharge form to your current lender. They will then forward all the required information to the new lender

Step 5 – Waiting on the pre-approval

The new lender will usually take somewhere to a few days to a couple weeks to process your refinance application from start to finish.

Step 6 – Running a Valuation

Your new lender will need to run a valuation on the property. The first valuations are usually free of charge.

Step 7 – Approval

Once the valuation has been conducted your lender will advise you in writing. This is usually know as a formal or unconditional approval. Your mortgage broker or lender will then ask the solicitor to prepare the loan documentation on your behalf.

Step 8 – Mortgage Documents are in the mail

Mortgage documents will be mailed out to you. They may be lengthly but it is a good idea to read through it all to understand the terms and fees charged. Mortgage brokers will also provide your a with Product Disclosure Statement and Preliminary Assessment prior to your application. These documents will explain all fees and maximum charges payable by you.

Step 9 – Settlement

Once the mortgage documents are back with your new lender. They will organise a time with your old lender to exchange the title and banks registration of mortgage.

You now have a new loan and will hopefully be saving on repayments or have the extra funds you drew against your property. You can now use your extra funds for the purpose which you had applied, being renovations or purchasing that next investment property.

Why Refinance your home loan?

With lenders adjusting their rates and many special offers* available on the market now might be the best time ever to refinance your home loan. You could find a lower interest rate depending on what your current home loan setup is fixed/variable and what features you require on your loan.

Depending on how much equity is available in your home you may be able refinance up to 80% LVR of your properties value. Going up to 90% LVR is also an option however you will subject to paying LMI.

Why do I want to refinance my home loan?

• Getting a better rate or deal

Usually the biggest reason why many Australian refinance their home loans. You could be saving thousands over the course of your loan just switching to loan with a lower interest rate. See your mortgage broker about a comparison calculation. Also be aware of bank fees, discharge and the new setup fees. A Loanbrite broker be able to the find the amount of time it takes before you cover the costs and start making savings on your new loan.

• Cashing out/releasing equity to purchase an investment property

Cashing out on your current home may be the best solution when purchasing your next investment property. It can take months or even years to save up a deposit for your next investment property.

However your property may have experienced substantially capital growth. Now worth much more than what you paid for it. It may be a wise idea to unlock this capital and use it as deposit to accelerate your investment property portfolio.

• Consolidate existing debts such as credit cards & personal loans

By consolidating your high interest credit card and personal loans debts you could reduce your repayments. The advantage of consolidating this form of debt is that you will pay it back at the lower home loan interest rate. However it is important you ensure the repayment history on the current debt is up to date. Most lenders will usually require the last 3 months worth of statements on debt that is to be refinanced.

• Home renovations

Want to give that bathroom a much needed uplift or is it time to update the kitchen appliances and benchtops? Another major reason many Australian’s refinance is to give their homes a much needed reno.

• Refinancing Business Debt

There are also niche lenders that will allow you to refinance your home loan to pay down business debt. They will also refinance the business debt at a residential interest rate.^ If your business is behind on its ATO tax debt refinancing your home may be a great solution as you will be paying much lower than a business lending facility.

How much can I borrow?

Everyones situation is unique. Get in contact with your Loanbrite broker today who help with calculations and work out your borrowing power.

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* Refinance offers are subject to borrowing amount and offers are only valid for certain time
^ Subject to terms and conditions. For further information: Get your small business out debt