Top 3 important mortgage refinancing tips
A mortgage is a form of security over a real estate property that is used to secure repayment of a debt also known as a home loan. Here we look at 3 most important tips when planning to refinance.
1. Mortgage switching costs
Sometimes there are a considerable amount of costs involved when switching a mortgage. This is true when breaking costs are involved. Breaking costs are applicable if you want to exit a fixed rate home loan earlier than the fixed term. However, keep in mind that banks are no longer permitted to charge an exit fee if you had taken the loan after the 1st of July 2011.
- Exit costs: Regardless there will be some exit costs in the form of a discharge or a settlement fee. The big banks at times charge about $160 to $350. There could also be some government charges
- Changing direct debits: If you are refinancing your mortgage and moving over all your banking including your transaction and credit cards, it’s wise to check your direct debits and switch them over as well. Else there can be cruel surprises.
- Time and effort: Keep in mind that traditionally there is some effort required from your end to complete the refinance process. You will require to provide documentation, spend time with a broker or banker, to complete the KYC checks.
2. Find the right mortgage to refinance
Finding the right home loan is all about understanding your current situation and future plans. While for some the right mortgage option is the best home loan rate for others it’s about finding a flexible enough product that will work with them. With over 100 mortgage products on offer from different providers, it’s now easier to find the right mortgage.
Some of the common features available:
- Comparison rate: This rate includes the interest rate and most fees and charges relating to your mortgage.
- Features: Understand the features you need
- Offset accounts – A transaction account that is linked to a mortgage account. It reduces your interest payable. Interest is only charged on the net balance, i.e. your mortgage balance less your offset account balance.
- Redraw – Gives you access to any extra money you have deposited into your home loan.
- Repayment types – Flexibility to repay the loan Principal and Interest or Interest Only.
- Switching: Ability to switch a part of or the total variable loan to a fixed rate.
- Conditions: This could be rather broad. Conditions are related to the credit policies and exclusions. I.e. in some instances, banks will blacklist certain postcodes or impose lower Loan to Value Ratios for certain property or investment types.
3. Get refinance ready
Being refinance ready is all about getting the required paperwork organised. This is applicable for all borrowers. These requirements could change depending on your situation.
The following will provide a general guide:
- PAYG borrowers Payslips – Most recent (3 payslips).
- Self Employed borrowers: 2 years of Notice of Assessments. Sometimes letters from the accountants.
- Bank statement – Transaction account, Mortgage, Credit Cards and other liabilities.
- Council rates – Rate notices issued by the local council. Most recent rate notice.
- ID – Driver Licence and Medicare.
A LoanDolphin mortgage refinance case study
Amy from Queensland had an investment loan. She was about to get married at the time when she came to use our LoanDolphin service.
Amy’s top requirement was to:
- Need funds asap to pay off some wedding and honeymoon expenses
Due to the above requirements, our expert brokers and bankers also discovered that the solution should:
- Be quick because funds are required to pay off wedding and honeymoon expenses.
- Favourable valuation to cash out as much as she could.
She spent 5 minutes creating a lending profile at LoanDolphin and explained her requirements and priorities. We got our expert bankers and lenders to compete for Amy’s mortgage. As a result, Amy received 8 tailored offers in just 24 hours. She didn’t have to chase up people, negotiate or waste any time. Finally, Amy picked the deal she liked and connected with the broker to get things done.
Broker managed to apply for her mortgage refinance application within days and settle in a matter of weeks.
We managed to provide Amy with peace of mind.We helped achieve her goal by bringing banks and brokers to compete for her.
It’s not hard to start refinancing your mortgageStart now