Thinking of refinancing? Here’s how

This step-by-step guide shows you how to navigate the process of refinancing your home loan.

With interest rates increasing materially in the past few years, refinancing your home loan to a lower interest rate with another lender is one way to reduce mortgage stress and cope in the current environment.

So to get you started, here’s an easy 5-step guide to refinancing your home loan.

1. Ask why you’re refinancing?

Most people start by focusing on securing a better rate – we all want to save money on repayments.

• You could start by using a refinance calculator to get an idea of what you could save by refinancing.
• Then you could use a home loan comparison calculator to crunch the numbers and see what might work best for you.

But a home loan is more than just a great rate. There are plenty of other reasons to consider refinancing.

• Reduce the term of your loan.
• Access features that better suit your needs.
  
• Consolidate other debts such as personal loans or car loans at the same lower rate.

2. Compare home loan features

It’s a good idea to look closely at your new home loan to check it’s right for you.

At AMP buying or refinancing with the Best Digital Bank in Australia1 is quick and easy online. Here are some features offered by different AMP home loans.

• Make additional payments without penalty to your variable-rate loan.
• Split your loan between fixed and variable at no extra cost.
• An offset account to reduce your interest.
• Redraw on variable home loans.
• Free online and mobile banking.
• No annual package fees.
• No monthly account management fees.
• Choose how you repay the loan – principal and interest, or interest only.
• Financial assistance in valuation fees.

Other lenders might offer similar or different options.

3. Understand the fees and costs

Before you go ahead, it’s a good idea to consider whether the financial benefits of refinancing outweigh any potential fees and costs.

• Discharge fees to pay out your existing loan – these vary across lenders and Australian states, and may be waived if you refinance with your existing lender.
• Break costs for leaving a fixed-rate home loan early.
• Settlement/application fees charged by your new lender.
• Valuation fees if your new lender needs to re-value your property.
• Lenders Mortgage Insurance (LMI) might apply if you have less than 20% equity in your property.
• Mortgage registration fees charged by some state governments.
• Ongoing fees to manage your home loan – check with your new provider.

4. Prepare your documents

If you’ve compared home loans, run the sums, and found the benefits of refinancing outweigh the costs, the next step is to put in an application with a new lender. It pays to be prepared – here’s a checklist of what you’ll usually need to show them.

✓  ID such as driver’s licence, passport, birth certificate – many lenders need you to certify your document

✓  Proof of income

• If you have an employer – latest payslips, group certificates, bonus/commission statements, employment contracts and tax returns.
• If you’re self-employed – Business Activity Statements and tax returns.
• If you’re on a pension or receiving benefits – bank/government statements.

✓  Bank statements for your existing home loan.

✓  Personal living statements for credit cards, personal loans, car loans, savings.

✓  Records of assets for any investment properties, shares and super.

✓  Home and Building Insurance – you usually need to update your Certificate of Currency  before settlement.

You’ll also need to complete an application form to confirm your dependents, assets and liabilities, the purpose of the loan, the amount you’re seeking and your monthly expenditures. Then you’ll need to supply paperwork on the property itself, including the title deeds.

5. Exit your existing home loan

So you’ve done all your homework and you’re ready to take the next step. It’s time to exit your existing home loan by completing a Mortgage Discharge Authority Form.

This will ask you about your property, the key people involved and the loan account details. It should also outline lender fees and any government charges.

Speak to a loan specialist

Exiting your current home loan and applying for a new one can be time-consuming. An AMP home loan specialist can take the stress out of refinancing – and speed up the process of application – by working with your current lender to establish your exit fees, complete your discharge form and secure your property’s title deeds.

Request a call back from a loan specialist today to understand more about your options and make the refinancing process easier.

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