How can I refinance my home loan?
Luckily for you, you now live in a world where switching home loans with certain providers can be done almost entirely online and in a timely manner. You’d be hard pressed to find someone who actually enjoys the process of looking at their home loan and applying, it’s a pain! If you’ve crunched those numbers and are ready to make the switch, have your documents ready, such as payslips, loan statements, your ID and anything else you might need. If a few years down the track after refinancing you think you can get an even better deal, you might consider refinancing again! When it comes to home loans, lenders need to earn your loyalty.
Frequently asked questions
1. Do I need a deposit to refinance my home loan?
You generally do not need to pay a deposit when refinancing your home loan, but there are a range of fees you'll probably have to pay. You may also have to pay for LMI if the value of your equity in the property (your initial deposit, plus the sum of your principal repayments so far and any capital gains) is less than 20% of the property's value, or if you're refinancing the loan to over 80% of the property's value.
2. Does refinancing a home loan hurt your credit?
Most people don’t realise that every application for credit goes into their personal credit file. Refinancing your home loan often could impact your credit score which can make it difficult to receive lower interest rates for future applications.
3. How much equity do I need to refinance my house?
Many loans have a maximum LVR of 95%, which means you can't borrow any more than 95% of the value of your home. If you want to refinance, this means you must have at least 5% equity in your property.
When it comes to refinancing, a general rule of thumb is to have 20% equity in the property to avoid having to pay for LMI.
4. Is it expensive to refinance a mortgage?
Refinancing a mortgage can be costly, however, these costs can be recouped over time if you're refinancing to a loan with a lower interest rate. The discharge fee will generally cost between $100-$400. The setup fees for the new loan can cost between $300-$1,000. A standard valuation fee alone can be between $200-$500.
5. How much can refinancing save me?
To work out what your monthly repayments might be and how much you could save by refinancing, you can use our home loan repayment calculator.
6. How do I know if I should refinance my mortgage?
You may want to refinance your mortgage for a range of reasons, including if you want to reduce your home loan interest rate, if you're unhappy with your current lender, to consolidate debt, to fund a home renovation or extension, or to fund a big purchase (such as a car) at a lower interest rate.