Under the right circumstances, refinancing or changing your home loan can be the answer to having a better night’s sleep. Switching to a new home loan can lower your monthly payments, pay off your mortgage loan sooner, or get funding to achieve another financial goal.
If you’re confident that it’s the right move for you, here’s the step-by-step process on how to refinance your home loan.
1) Review your current financial position
Being clear about your goals and objectives and assessing your current financial situation will help you determine if making the switch to a different lender would be worth it or if it’s the right time to do so.
What is it with the existing home loan that is not working for you? Are you looking for a lower interest rate? Of course, getting cheaper rates can help you save money with monthly payments, but that is only one factor you have to consider.
You will have to pay fees to change lenders, so you try to look at your current home loan, repayments, and existing loan structure to know if switching works for your advantage.
When it comes to assessing your current situation, you have to look at your income, other existing debts, assets you own, and the current value of your property.
2) Compare home loan products and features
While most people often aim for the lowest interest rate, there may be home loan features and fees that may cost you more. So, compare the interest rates as well as the fees, features, and add-ons to know the overall cost of the home loan.
3) Consider the costs and your borrowing power
Take the time to review how much you can afford for a home loan, especially when your situation has changed since you took your current home loan.
Also, consider the upfront and ongoing costs associated with refinancing, such as application fees, exit and break fees, settlement fees, and government charges.
Review how much you can potentially save by using a refinance calculator or, better yet, talk to a mortgage broker to help you look at various loan options and figure out what best suits your situation.
4) Contact your current lender
Before you make the switch to a different lender, talk to your current lender first as they maybe able to offer you a better deal. This can help you save time and paperwork.
5) Apply for a new home loan
If you’ve already done your homework and you’re now confident that you’ve found the home loan that fits your needs and goals, it’s time to put up your application. You may apply online, over the phone, via a broker, or by going to a branch.
The lender reviews your income, monthly mortgage payment history, and other financial commitments you have. They will also look at how much your property is currently worth by doing a valuation.
Once your application gets approved, your new lender will send you a loan contract to sign. You may seek professional advice before signing the contract; otherwise, make sure to consider the terms and conditions in the document carefully.
6) Wait for the settlement
Settlement happens once you’ve signed the loan contract and your new home loan is used to pay off your existing home loan.
Check the details in your contract as to when you need to start paying your new home loan repayments.
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