In Australia we are often reminded that we have escaped the worst of the devastating effects of the Global Financial Crisis, and that our economy is recovering strongly. However, despite these reassurances many Australian home owners are still worrying, struggling or both. As a result, almost two of every five mortgages sold in May 2010 were for refinancing purposes, according to the Australian Financial Group Mortgage Index. At the same time, the number of Australians upgrading their homes also dropped, showing that the rise in refinances was aimed at better managing finances, rather than moving home and moving loans. 

Of course there are many more reasons you could choose to refinance your existing loan, from a holiday or a new ensuite, to a new car or a new baby, and with loan refinancing becoming more prevalent, there are also many more options available to you as well, which can make the comparison process arduous as a result. That is why at Home Loan Finder we have compiled this comprehensive guide to refinancing, to walk you through each step of the process, and allow us to step in when you need a little more help and advice. This guide addresses all of the common questions which are probably buzzing around in your head, in easy to understand language and terms, and if you have a question which is not answered here, you can always contact us. 

Why should I refinance?

The underlying motivations for refinancing a home loan are often to save money and pay off your loan faster. However each of us is in a unique financial position and there are differing loan features and options which can help one person save money on a refinanced home loan, where a different loan option will better suit another. As you start considering your goals for refinancing your loan, consider whether you could benefit from refinancing to a lower interest rate, to access your equity or consolidate other debts for example. 

Can I refinance to a lower interest rate?

• Consider whether you could benefit from switching to a variable interest rate. Variable interest rates differ between home loan lenders but the feature they all share is the fact that they move in line with decisions by the Reserve Bank of Australia; when the RBA decides to increase the cash rate variable interest rates are likely to rise, when the RBA decides the economy needs a reprieve they will lower the cash rate to encourage spending. However, while variable interest rates are based on the official cash rate each lender has the freedom to adjust their rates as they choose and they can match increases or decreases, match them in part or double them if they choose. You could benefit from refinancing to a variable interest rate if you locked your loan into a fixed interest rate while interest rates were at their highest. Similarly variable rates tend to be around 1% lower than fixed interest rates because you are benefiting from the fact that rates could go down, but you are also risking that they could go up.
• Consider whether could benefit from switching to a fixed interest rate. Choosing a fixed interest rate can save you money especially if you refinance to a fixed rate while rates are rising. To make sure you save interest when you choose a fixed interest rate, keep in mind that the average standard variable rate is around 7.5% but it is able to go down, therefore if you choose a fixed interest rate for a long fixed term, ensure you are not fixing at a rate higher than this.
• Compare comparison rates. The comparison rate of a home loan tells you the total cost of the loan including account fees, application fees, ongoing fees, compound interest periods and honeymoon interest-rate periods. This means that all of the fine print has been taken into account and you can see clearly which is the most affordable loan by looking for the lowest comparison rate. Just remember that while the comparison rate is calculated on the typical cost of a loan, it does not take into account one-off charges such as redraw fees or exit fees so you will need to compare these costs separately.

Can I access the equity in my home by refinancing?

• It is very likely the value of your home has increased. Typically if you keep on schedule with your repayments and you maintain your home then chances are it has appreciated in value if you have held your loan for several years. As a result you may have bought your home for $300,000 and so your loan was for $270,000 but your home may now be worth $500,000. In addition to the equity you have built up as property prices increase, you will have also built up equity in repaying the loan and the value of that loan may now be much less than the original $270,000. Therefore you have accrued several hundred thousand dollars in equity in your home and if you refinance your loan amount up to the new value of $500,000 then you can access that equity as cash.
• You are protected if you refinance to access equity. While it can be tempting to access all of the value you have accrued in your home most lenders will only allow you to borrow a maximum of 80% of the new value so that even if property prices decrease you do not owe more than your property is worth.

Can I refinance to take advantage of features not offered by my current loan?

• Consider how you are using your loan and how you would like to be able to use it. When you first applied for your home loan you may have been a first home buyer or on a tight budget and so you chose a basic home loan which had an affordable interest-rate and minimal fees, but this also meant it had minimal features as well. As you became more familiar with being a mortgage holder you may have found that there are features you wish you had and which you wish you weren’t charged extra for as can often be the case on a basic home loan. These features could be things such as additional repayments and redraw facilities so if your loan does not offer the features you want you can save money by switching to a loan which doesn’t charge extra for using your loan the way you want to.
• You may not necessarily have to change providers. Many home loan providers offer a range of home loans and if the loan you have doesn’t fit your needs, or income then you can approach your current provider to see whether they can upgrade your loan account or add the features you need as this can often be more affordable than refinancing to a new loan provider, but you are still getting a new loan with features which better fit you.

Can I consolidate my debts by refinancing?

• Home loans have one of the lowest interest rates of any form of finance. This means if you have personal loans or credit card debts you are likely to be paying a higher interest rate on these debts than you are paying on your home loan. Therefore if you consolidate your other debts into your home loan you can be saving on interest charges. By consolidating your debts into a lower interest finance option you can be paying less each month for your overall debts, plus all of your payments are rolled into one payment once a month and are therefore easier to manage. You are also paying just one account fee or monthly fee on your loan rather than numerous annual fees on credit cards or personal loan accounts.
• It will take you longer to repay your other debts. While the initial idea of consolidating your debts into your home loan will appear to save you money and make it easier to manage your finances your personal debts are now going to take you longer to repay because they are now part of a 25 or 30 year home loan term. Therefore overall you can be paying more interest because even though you are paying a lower interest rate, you will be paying it for much longer as the balance of your debts and the balance of your home loan are rolled into one.
• You can keep your consolidated debts separate. If you are refinancing to consolidate debt make sure to ask about keeping those consolidated debts separate. Many providers will allow you to refinance your home loan and use any equity in your loan to repay your debts, while keeping the balance of those debts as a separate loan but still being charged the lower home loan interest rate. You then continue to make your home loan repayment as normal, as well as making a repayment to the debt portion of your loan. This allows any additional repayments you want to make to your consolidated debt to go straight to reducing that portion of your loan so that you can clear your debts from your home loan quickly while always keeping in mind the trouble you got yourself into with your credit cards to avoid it happening again.
• You have few options if it does happen again. If you fail to learn the lessons which come with unmanageable personal debt then you can easily find yourself in the position of needing to refinance to repay debts again. However in this case if you are unable to pay your debts your home can be at risk and you cannot always rely on being approved for a debt consolidation refinance loan again.

Can I borrow money to renovate?

• Refinance to a line of credit loan. A line of credit loan gives you access to the equity you have built up in your home to use when and as you choose. You can draw down on your line of credit at any time often without being charged fees although there may be a minimum drawdown amount. You also do not usually have to pay back your line of credit until you have used all of the available credit.
• You can access your equity when you need it. When you have a line of credit approved on your home loan refinance then you can draw down whenever you need supplies or you need to pay tradesmen during your renovation. This means you don’t need to complete paperwork or apply directly to the bank each time you need funds for your renovation because as anyone who has built or worked on their home knows, there are expenses you can plan for but there are plenty which you can’t, and those are the ones that often need to be paid right away.
• Refinance to a construction loan. If you are doing significant renovations you may qualify for a construction loan. Construction loans are typically used if you are building a new home as the progressive drawdowns allowed coincide with payment requirements of a builder, such as slab, frame, roof, lock-up and hand over. However if you want or need to manage your renovation in a more structured manner you can refinance to a construction loan and pay for the renovation of your home in stages.

Can I refinance if my situation changes?

• Change of ownership. If your relationship breaks down and you split from your partner or divorce your spouse then you are likely to need to refinance your loan into one name. If the home is being refinanced from joint ownership to be in your name you will be assessed as a loan candidate for your ability to repay the loan on your own. You will need to make sure that you can comfortably service the loan with your income alone because you do not want to be refinancing again in a couple of months when you find you can’t meet the repayments.
• You can’t afford your loan. It is much easier to refinance your home loan before you have begun defaulting on payments because in order to qualify for a refinance you will need to be an attractive loan candidate. Therefore as soon as you feel you are having trouble meeting your loan repayments contact your provider and find out what refinancing options are available to you if you are suffering financial hardship due to job loss, illness or family crisis. You may be eligible for a repayment holiday until your situation improves all you may be able to refinance to extend the term of your loan and therefore reduce your monthly repayments.

What are the costs of refinancing?

You may not have thought much about the costs of refinancing because refinancing is supposed to be saving you money not costing you money right? Well that is true but there are still costs which must be paid to close your existing loan and re-open one which better suits you and it is possible to come out ahead so that the benefits outweigh the fees. 

How much will I have to pay in exit fees?

• Exit fees or deferred establishment fees depend on your lender. You may have a loan which does not charge any exit fees but chances are you weren’t thinking of closing your loan at the time you applied and so you did not seek out the loan with the lowest exit fees. As a result you could be looking at discharge fees of between $50 and $200.
• Penalty interest. In some cases if you are breaking a fixed interest rate term or a introductory honeymoon period you could be charged tens of thousands of dollars in exit fees so it is important to know exactly what you’re in for.
• Switching fee. If you are refinancing with your existing lender you may be able to save on other fees but you could also be charged a switching fee to swap your loan account which could be $100 to $200.
• Exit fees could be fixed or a percentage of your loan amount. This means that you could be faced with higher exit fees if you have a higher loan amount but it is still better to refinance earlier in your loan term because if you refinance to a longer term then you will be paying more interest over the life of the loan.

How do I avoid exit fees?

• Consider your existing lender. While you may not have a loan which is exempt from exit fees many home loans now include a portability feature which allows you to take your loan with you when you move house. Therefore if you are refinancing a new loan for a new home then invoking the portability feature and staying with the same lender can save you hundreds of dollars as activating loan portability will cost you just several hundred dollars in total and you can avoid all of the other fees associated with refinancing. If you are not moving house or don’t have a portable loan your lender’s switching fee is still likely to be lower than traditional refinancing costs.
• Fewer establishment fees can mean higher exit fees. The most exit fees are often charged on a variable-rate loan if you leave within the first 3 to 5 years and can be several thousand dollars. You may not have noticed these fees when you applied for the loan because they are typically charged on loans with no or low upfront fees as your lender knows that the average life of a loan is now as low as 20 months because borrowers are refinancing or upgrading their home more often and so the lender wants to make sure they can cover their costs. As a result the earlier you refinance your loan the more you are likely to pay exit fees.

How much will I have to pay in establishment fees?

• Application and registration fees. When you refinance you are opening a new loan account and so you are likely to be paying application, documentation, settlement and handling fees which can add up to around $800. You will also have to pay registration fees for your new mortgage which can be another $100.
• Lenders mortgage insurance. If you are refinancing to a loan which is more than 80% of the value of your property you will need to pay lenders mortgage insurance which is a percentage of your property value. This can be a particularly hefty establishment cost because you will have paid it already when you applied for your first line and it is an unavoidable cost unless you can raise a 20% deposit to refinance your loan.
• Valuation costs. So your lender knows how much equity you have available to refinance they will need to do a valuation of your property and valuation fees can often run to $200.
• Stamp duty. The stamp duty you pay depends on the state in which you are refinancing your loan but it will usually be charged as a percentage of your loan amount and can add several hundred dollars to your establishment costs.

How do I avoid establishment fees?

• Shop around and compare fees. Not all lenders will charge loan application fees and may be especially willing to waive these fees for refinance application, or maybe running a special promotion for no or reduced application fees so you can save hundreds and hundreds of dollars on your refinance if you take the time to compare offers from different lenders.
• Save on stamp duty. You may not have to pay stamp duty on your refinance loan if everything on the application is the same, that is if the loan is in the same name and security is held over the same property. If you do have to pay stamp duty upfront you may be able to apply for a refund from your lender.

How do I check for hidden costs and tricks?

• A longer loan term will cost you money. As your lender goes through the details of your home loan refinance make sure that you are happy with the new loan term, for example if you are refinancing from a 25 year loan which you have been paying for five years make sure your loan is refinanced for 20 years not for another 25 years as you will be paying more interest over the longer term.
• Make sure you benefit at the end of any introductory offers. Refinancing to a fixed interest rate for example may appear to be saving you money but make sure you know the interest rate your home loan reverts to at the end of the fixed rate term.
• Make sure you break even within 12 to 18 months. You now know that exit fees and establishment fees are to be expected but when you refinance you should also expect to be better off within a year. This means if you add up all of the costs to refinance, you should have saved this amount with your new loan within the first year and a half of the loan term.

When should I refinance?

• When your loan is more than 3 to 5 years old. As you have seen above, deferred establishment fees and exit fees can add up to hundreds or thousands of dollars before you have made any savings on your refinancing. However if your loan is more than three years old then you are likely to enjoy a greater benefit because exit fees and establishment fees are often tiered depending on how long you have had your loan. For example if you exit your loan after the first year you may be charged 3% of the value of your loan in exit fees, if you refinance after the second year you may pay 2% but at the end of the third year you may only pay one percent of the value of your loan. Waiting 3 to 5 years to refinance also means any introductory or honeymoon offers or interest rates have ended and lenders typically charge you higher exit fees to leave your loan during the honeymoon period.
• When you move house. When you are moving house is a great time to reassess your loan needs and when you are upgrading to a new home the timeline is likely to coincide with being 3 to 5 years into your current home loan term as well. When you move house it is not only your needs when it comes to the size of your backyard or the number of bedrooms which change, your financial needs change as well so if you are moving to a bigger house as your family grows then you may also benefit from refinancing to a loan which allows you to redraw additional repayments you have made to cover those family emergency expenses.

What information do I need to provide to refinance?

One of the simplest and most affordable ways to refinance your home loan is to do so with your current lender because if you approach them as soon as you start thinking about refinancing they are likely to come up with a great deal to encourage you to stay because it makes better business sense for your lender to try and keep you, rather than them having to spend new marketing dollars to attract a new customer in your place. 

Even though you are refinancing with the same lender you do still need to provide acceptable documentation for approval and follow a traditional loan application process. This includes: 

• Your lender should still have your application form. Your current lender should still have your original loan application on file and if your details, such as your address, the property details and your income and expenses are the same you may not have to fill out a new form.
• Tax returns and payslips. Your existing lender is not likely to take your word for it that the information on your original application remains the same and so you will often need to provide payslips from the previous two months, as well as bank statements from the same period to verify your spending and saving habits.
• Ask your lender for their paperwork. In discussing the refinance options if you stay with your current lender they may have promised you a number of interest-rate discounts, fee waivers or included features but make sure you get this in writing. Ask your lender for a Good Faith Estimate and a Truth in Lending Statement so that you can clearly see that deal you are getting. Your Good Faith Estimate will detail all of the fees associated with your refinanced loan option and your Truth in Lending Statement will tell you the annual percentage rate and a comparison rate so you can see the total cost of the loan for the year.
• Get the best deal. So, now you know that your lender wants to keep you because it is easier for them to keep an existing customer than attract a new one. This puts you in a position to negotiate for the waiver of any fees or drawn out application processes and you may be able to have your lender eliminate certain fees or require reduced documentation because you are an existing customer.
• Complete the paperwork. Your lender will provide you any disclosures which need to be completed and signed and this allows them to complete an appraisal of your property to confirm the value of the refinance. Once you have signed all of this documentation your loan will be settled and your mortgage refinance will be complete.

What if I want to refinance but have bad credit?

• You can still refinance if you have poor credit. The first thing you should do if you know or suspect that you have bad credit is to confirm just how bad the situation is by obtaining a copy of your credit report. This will allow you to see whether there are any fraudulent charges or inaccurate defaults which can be removed from your credit history, as well as giving you a copy of your credit report to give to lenders as you shop around so that they do not have to check on your credit, because each time your credit is checked this also goes on your report.
• If you have poor credit you may not be able to refinance to the lowest interest rate. If you have a poor credit history the interest rate on your refinanced loan is likely to be decided based on your particular circumstances and so you may not be able to take advantage of specials or discounts lenders are running.
• Avoid being targeted by scams. When you know that you have a poor credit rating it can be tempting to jump on the first deal which offers you guaranteed finance however do not respond to unsolicited e-mails or phone calls and never send personal details over the Internet. Instead look for specialised nonconforming loans which are specifically designed for people who are self-employed, are contractors or have impaired credit. Non-conforming loans make it possible for you to refinance your loan and may simply offer fewer features or less flexibility, or a higher interest rate or higher fees.

What if I want to refinance but can’t prove my income?

• You can refinance if you are self-employed, are a contract worker or a seasonal worker. If you can’t prove your income through regular payslips or tax returns, compile as many other financial documents you can to prove your cash flow. Provide statements from your transaction accounts or copies of invoices which have been sent to your clients. You can also have an income statement and net worth assessment prepared by a certified public accounting firm to prove that you can service the loan. Alternatively if you have just lost your job you could still be able to prove income from a rental property or part-time business.
• Check your credit history. If you are unable to provide the levels of documentation usually required to assess your case for refinancing, then it is important that you can prove that you have a good credit history and will be able to manage your loan. Therefore check your credit history before you start applying and look for any issues which may concern a lender and make sure you can explain them. You may even be able to correct any issues by paying an outstanding bill you didn’t know about or removing a charge on your credit history which was made without your knowledge.
• Prove all of your income streams. This means any funds you are getting from anywhere, for example if you loaned your sister some of your savings so she could buy her first home then make sure you document the amounts she is paying to repay your loan. If you work on a contract or consulting basis have your freelance clients right verification statements so you can prove as much as you can.
• Refinance to a low doc loan. If after showing lenders your official net worth and details of all income streams they still require traditional payslips or tax returns then you can look into low documentation options. A low doc loan allows you to self verify your income if your loan to value ratio is less than 80% and this means you do not have to rush around looking for paperwork you don’t really have but you can still have your loan refinance approved.

How do I refinance without equity?

• Federal government refinancing. Refinancing is not always about accessing the equity which has built up in your home to repay other debts or complete renovations. Sometimes you need to refinance because you can no longer afford the repayments of your home loan but if you have no equity in your home there is little room for negotiation. However there are options available from the Federal Government which require 5% equity, or even no equity at all. A Federal Housing Administration loan sets a maximum loan amount based on the average value of the homes in your area and allows you to refinance if you have just 5% equity.
• Refinancing costs can be added to the loan amount. If you know that you do not have enough equity in your home loan to refinance successfully then it is important that you are upfront with your lender from the beginning. Once your lender knows the situation they can provide you with detailed figures for the exit costs and new application fees and these can be added to your loan amount so you don’t need to pay them now. In this case you will need to provide sufficient documentation for approval based on your income and financial situation.

How do I compare refinance options and choose the right loan?

While you can make refinancing easier and more affordable with these tips, it is still not something you want to go through regularly. Therefore make sure that when you refinance you are getting everything you need and want to cover your home loan requirements for the coming years. As you compare your refinance loan options consider the benefits and drawbacks of the following loan features. 

Should I choose a standard variable interest rate loan?

• Standard variable rate loans are some of the most popular in Australia. This is because when you choose a standard home loan without a lot of extra fancy features the lender is able to offer you a much lower interest rate and fewer, and in some cases no, fees. This means that even though your interest rate is variable and can go up when the official cash rate rises you are getting a more affordable loan overall and you are not paying for features you’re not going to use.
• If you haven’t been using the additional features of your home loan refinance to a more basic loan. Being in a position to refinance you have been repaying your loan for several years and you know how you use your loan, how you want to use it and how you don’t use it, for example you may have had the best intentions to make additional repayments to your loan but your circumstances changed and perhaps you have started a family and so there is less spare cash around to contribute to your loan so you don’t need the option to make additional repayments or redraw those repayments and instead you can save by refinancing to a lower spec loan.

Should I choose an all in one loan?

• Your home loan, transaction accounts and savings accounts in one. An all in one loan is as the name suggests all of your financial accounts rolled into one. This means that you are able to have all of your wages and other income deposited into your loan account, as well as using your loan account as a savings account. All of the funds which are deposited in the account above the minimum monthly repayment amount are yours to access, but until you need them they are sitting there offsetting the interest charged on your loan amount.
• You need to be very disciplined. Having one account and one balance for all of your finances means that you need to be very organised in your spending making sure that you stick to your budget and do not overdraw your account, while still being able to maintain a balance in your account which you can access as savings or an emergency fund.

What type of interest-rate should I choose?

• Fixed interest rate. When you choose a fixed interest rate, it is not fixed for the entire term of the loan but for the term of your choosing, often from one year up to 15 years. Having a fixed interest rate also means that your repayments will not change over the fixed term no matter what increases the Reserve Bank makes to the official cash rate. This can give you certainty in your home loan repayments and make it easier for you to budget each month, and you do not have to wait to hear the Reserve Bank’s announcement each month. However you are paying for this certainty in an interest-rate which is typically higher than the standard variable interest rate but if reliability is important to you this cost will be worth it. You will however need to make sure you know the interest rate your loan will revert to at the end of the fixed period because your fixed rate term could end in the middle of a higher variable interest rate. You are best to choose to refinance to a fixed interest rate at the bottom of the interest rate cycle when rates are at their lowest because this will protect you from future rate rises and you won’t be missing out on too many decreases.
• Tracker interest-rate. Where a standard variable rate is likely to move in line with official cash rates, a tracker follows the official rates exactly. So if you had a standard variable interest rate and official rates dropped by 1%, your lender may choose to pass on only 0.5% of a discount, whereas with a tracker interest-rate your repayment interest rate will decrease by the same 1% drop. At the same time this means you are also subject to increases in full as well.
• Discounted interest rate. A discounted interest rate is a great way for lenders to attract new business and so you would typically find lower interest rates in the first one to 2 years of your home loan. However if you are looking to refinance to a better deal look for a loan which offers you a discount over the life of your loan. Many providers will offer such a discount with their professional packages and the discount is tiered on the amount that you borrow, the more you borrow the more your interest rate is discounted. This means that if you have a 0.7% discount for the life of your loan you can always be one or two rate rises ahead.
• Capped interest-rate. This is a variable interest rate which is able to move up and down with the official cash rate and the decisions of your lender. However unlike a traditional variable interest rate a capped rate will not rise above a certain amount so you are protected to some extent from rate increases while still being able to enjoy rate cuts.

When should interest be calculated?

• Interest is calculated daily. This is the most common interest calculation used by Australian lenders and it means that your interest charges are compounded daily. However with your interest being calculated daily your interest charges reduce every time you make a payment which means you can make significant benefits by making additional repayments or using a linked 100% offset account because the interest calculations begin again each time you make a payment so the less you owe the less interest you pay.
• Annual interest calculations. Other lenders may calculate interest annually so your payments are not deducted from the interest calculations until the end of a 12 month period.
• Interest in advance. Some home loan lenders will offer you the feature to pay your interest in advance for a full financial year. If you agree to pay your interest in advance you can often qualify for a discount, as well as being able to claim interest payments sooner if you are repaying an investment property.

Do I need an offset account?

• A 100% offset account reduces the interest you pay. When you are refinancing you want to make sure you are saving as much money as possible and an offset account can help you do that now and over the life of your loan. A 100% offset account is linked to your loan account and is much like a traditional transaction account. You can have all of your wages, income and your savings deposited into your offset account to save you interest. Where the interest on your loan is calculated daily every day counts which is why leaving all of your funds in your offset account until you need them saves you the maximum amount because each time your daily interest is calculated on your home loan it is calculated on your loan amount minus the amount in your offset account. Therefore if your home loan is for $250,000 and you have $10,000 in your offset account then you are only charged interest on $240,000 that day.
• You maintain access to your funds. Unlike making additional repayments to your loan where you then need to redraw those repayments, with an offset account you can use the account as a normal transaction account which can encourage you to channel all of your funds into your offset account because you know they are not going to be locked away, but until you need them they are working hard you to save you interest.
• You are taxed on interest earned but not on interest saved. If you were to have the funds in your offset account in a traditional savings account then you would have to declare the interest you earn from those savings at tax time. However the savings you make on your interest are tax-free and your home loan is likely to be charging you higher interest than you would earn in a savings account anyway.
• Make sure your offset account is part of a package deal. Offset accounts are often offered as part of a professional package on a home loan refinance deal and if you do not qualify for a professional package for your loan amount, an offset account can be expensive to use on its own. However loans around $250,000 or more often qualify for professional packages.

Do I need the option to adjust my payments over or under?

• Making additional repayments. Every spare dollar you can contribute to your home loan is going to save you time and money because additional repayments come off of the principal loan amount and reduce the term of the loan and therefore the amount of interest you will pay. If you want to be able to deposit extra funds into your loan account when you receive a sizeable tax return, cash in Christmas cards or a bonus at work then make sure you refinance to a home loan which allows you to make additional repayments for free because if you are charged for these transactions you will be undoing all of the benefits. At the same time make sure you can also redraw those additional repayments for free if you find you need them to cover an emergency.
• Making lower repayments. You may want to take a repayment holiday because you are taking time off work to have a baby, you are sick or you are actually going on holiday and don’t want to worry about your home loan. Home loans which offer repayment holiday options each have their own criteria and you may need to have held your home loan for a minimum period of time, often 18 months, you may need to prove that you have a job with the same income to go back to at the end of your repayment holiday, or you may only be able to reduce your repayments rather than take an entire break and you may still need to pay 50% of your repayments during a holiday for example.

How can I simplify my refinance loan comparisons?

• Home Loan Finder understands your situation. As you make comparisons of home loan refinance options and use any of the number of online home loan calculators you are getting just a general idea of what you are eligible for and how each loan type will work for you. However when you contact Home Loan Finder our expert staff will ask you a few pertinent questions to understand your financial situation and your refinance needs and will then be able to recommend a refinance option which suits you, with all of the features you need, and none of the ones you don’t so you can be sure you’re making an informed decision.
• Have an industry expert negotiate on your behalf. Home Loan Finder can negotiate with the lenders offering refinance products to suit you to make sure that you get the best deal. We are also able to negotiate a lower interest rate than you would be able to secure through a broker because Home Loan Finder does not charge your lender trailing commissions from the interest on your loan. Once we have negotiated the best refinance loan deal for you, we will put you in direct contact with your lender so that you can get to know them and speak face-to-face rather than dealing through a third-party broker and never meeting your new lender.

How will my refinance be processed and how long will it take?

Now that you have access to all of the information you need to make sure that you are able to save money and repay your home loan faster you want to get started, so make sure you know what to expect from each stage of refinancing a loan and approvals so that you can be prepared and organised to keep the process running smoothly. 

How and when should I seek preapproval?

• If you are buying a new home obtained preapproval before you start your property search. Having preapproval organised to ensure smooth refinancing of your home loan to a new property means that you can be secure in the knowledge that the funds will be available to you when you need them from your existing home loan and the equity you are refinancing to access. It is important to have preapproval of your refinancing in writing before you start your property search and well before you make an offer because you do not want to be disappointed and miss out on a property you thought you could afford, only to have to go back to the beginning of your search with a new budget.
• When you have your verifications and documents organised. Whether you are refinancing with your existing lender or with a new lender you are likely to still be assessed as an ordinary loan candidate. This means you need to have collected verification of your income, up to 6 month’s worth of recent bank statements and any other information about your financial situation which can show that you are a reliable loan candidate. Remember that you will also need this information for each person listed on the original loan and each person who will be listed on the refinanced loan.
• Processing of the application. Your new lender will then verify all of your information and details and may contact your employer or existing lender to build a picture of your financial history. You will then be notified if any other documentation is required, and while preapproval may be able to be issued in a matter of days, the verification of your information can take between one and three weeks.

When is my property valued and how do I ensure the best appraisal value?

• Comparing your property. A property appraiser will be hired by the lender who is refinancing your loan to confirm the value of the home you are refinancing. An appraiser will compare the sale prices and values of houses which are similar to yours in your area, often completing interior and exterior inspections. It can take around two weeks for an appraisal to be scheduled and the value to be confirmed.
• The appraisal process. An appraisal of your property for refinancing purposes will confirm the value of your home for your refinancing lender, as well as provide information on the current real estate market in the area and whether it is stationary, or on its way up or down, as this information can help your lender determine whether your home is going to continue to increase in value and whether it is a financially sensible move to be accessing the equity in the property, as your lender also wants to ensure that your loan amount is not more than what your house is worth. You may also be required to pay for the appraisal and this can cost between $300 and $400.
• The value of your home is appraised during the approval process unless you are concerned. With the property market having been so unpredictable in some areas over the last year if you are concerned about the value of your property you may choose to have your home valued before you approach a lender for a refinance. If you find at the beginning that there is little or not enough equity available in your home according to its value you can wait out the refinancing process until property values rise, or you can make sure you are looking for a refinance loan which does not require significant equity amounts. Also, some refinance lenders will require property appraisals to be completed for a more comprehensive report of your property value.
• Make sure major structural repairs are complete. Having unfinished or unresolved structural issues in or around your home can significantly affect the appraisal value because these are the most expensive to complete if a new owner were to take possession of your home. These are also the additions which will make the most difference to adding real value to your home because while cosmetic changes such as new plants in the garden or a fresh coat of paint make your property more appealing the value that these changes add is minimal compared to a home which has been made structurally sound.
• Don’t discount aesthetics. While making small cosmetic changes to your house is not going to add hundreds of thousands of dollars to the valuation it can make a difference to how your property is viewed by your lender and how the overall appraisal is submitted. If you are able to present a neat, tidy and clean property then you are able to show that the home has been regularly and carefully maintained and is good value.

When is settlement of the loan and what do I have to do?

• A signing appointment will be made. Once all of your personal information has been received and verified and evaluation of your property has also been completed your loan will be approved and your lender will open an account to pay off the amounts of your current mortgage, as well as conduct a title search to ensure there are no liens on the property. An escrow agent may handle the signing and closing of your loan to review all of the terms and documents. This appointment can take between 30 and 90 minutes and requires you to sign every document and verify your signature and identity.
• Cooling off period. After you have signed you will have a three-day cooling off period where you are able to cancel the loan if you choose, if you are not happy with the amount you are able to access through the refinance or if your circumstances change. You will not be able to access your funds for your loan refinance until the end of the three-day period but you can choose to waive this option if you need your loan to be refinanced sooner.
• Funding of your loan. At the end of the three-day waiting period your new lender will use the proceeds from your refinanced and approved loan to pay off your old lender. You are able to leave this payment process to your new lender and they will simply forward you payment information for your new loan within around four weeks. You can then begin making your repayments to your new loan.

How do I maximise the savings on my new home loan?

Regardless of your reason for refinancing your home loan you want to make sure that you take advantage of every opportunity to repay your loan sooner and save money on interest charges. Therefore here are a few final tips on the features and practices you should concentrate on when managing your new loan. 

How do I maximise my savings by using an offset account?

• Make sure you have a 100% offset account. Most home loans now offer full 100% offset accounts but make sure that all of the savings in your offset account are going towards saving you on interest charges. If you were using a partial offset account earning an interest rate of 2% on your $10,000 of savings, offsetting a loan of $120,000 being charged a 5% interest rate, you still pay 5% interest on $110,000 of your loan, and 3% interest on the remaining $10,000 of your loan. This is the partial offset account interest rate of 2% deducted from your normal 5% interest rate, so the savings are much less significant.
• Use your 100% offset account for 100% of your funds. As soon as you refinance to a home loan with an offset account make sure you adjust all of your wages and income to come into your offset account. Make sure your employer pays your wages into your account and that any other income you are paid from investments or rental properties is deposited directly into your offset account because every day counts. Also if all of your funds are automatically deposited into your offset account you don’t have to remember to make transfers.
• Don’t use the funds in your offset account. So we have just told you to pull all of your finances into your offset account and now we’re saying you can’t use any of them – don’t worry because you will use some of them but those which you don’t use will continue to work hard for you. The best way to keep your funds working hard in your offset account is to leave them there therefore don’t automatically discard the credit card offers your lender presents on top of your home loan application as they are often willing to waive annual fees on the card, for as long as you hold your home loan. If you use a credit card with a long interest-free period you can make all of your purchases and pay all of your bills using the bank’s money during the interest-free period and all of your savings and income can stay in your offset account to save the interest every day. Then before the end of the interest-free period you simply use the amount you need from your offset account to pay your credit card bill back to zero and you have saved the maximum amount of interest using your offset account.

How do I maximise my savings by making additional repayments?

• Make your loan repayments fortnightly. If you make your home loan repayments fortnightly instead of monthly you will actually be paying your loan off faster even if you still pay the minimum amount. This is because in a year you will actually end up making the equivalent of 13 monthly repayments if you make your repayments fortnightly as months rarely have exactly 4 weeks in them and if you are making regular fortnightly repayments every second week rather than waiting for a specific date each month then you have more opportunities to make loan repayments.
• Use windfalls as additional repayments. When you come into unexpected money either through a lottery win, an inheritance, a bonus at work or even a pay rise then these funds are extra to what you need to live on and what you have budgeted for so if you transfer them directly into your home loan you won’t have a chance to miss them and they will be working directly to reduce the principal amount of your home loan, and as a result will reduce the term of your loan and the interest you pay.
• Shorten your loan term. Choosing a shorter loan term will mean less opportunity to be charged interest, and as a result you’ll make more savings in interest. For example on a $250,000 loan with an interest rate of 7% you will save over $68,000 by repaying your loan in 25 years instead of 30 years and there is only a difference of $100 in the monthly repayments. If you were to repay that loan in 20 years you would save over $130,000 in interest compared to a 30 year loan and be paying less than $300 extra a month.

How can I negotiate the best refinance deal with my lender to save me money?

• Home Loan Finder can negotiate on your behalf. At Home Loan Finder we offer a range of financial services which go above and beyond what you could expect from a traditional broker. We are able to negotiate with a lender offering a refinance deal which appeals to you and meets your needs so that you can be sure to get the best interest rate. We even guarantee to be able to get you an interest rate on a refinanced loan with any of Australia’s big four lenders which will be lower than a broker will be able to offer you. Plus, while we will negotiate with your chosen lender and make sure that they are giving you the best deal possible, when it comes to signing the paperwork you will deal directly with your chosen lender so you can see and experience the customer service you can expect from your new lender as well is ask any questions directly and have them answered face-to-face rather than dealing through a third-party broker. This means that you are able to better understand the loan you are refinancing to and you will be able to use it to its full potential, exercising all of its money-saving features.
• Home Loan Finder does not charge trailing commissions on your new loan. While traditional mortgage brokers do not charge you a fee for their services directly, they are taking trailing commissions from the interest you pay on your home loan for the life of your loan. However Home Loan Finder does not take any trailing commissions and so is able to negotiate a lower interest rate with lenders as a result.

Refinancing your home loan is a big decision and as this guide shows, there are a lot of questions to be answered about the process before you even decide whether refinancing is the right option for you. So whether you are having trouble meeting your monthly repayments, want to access the equity you have worked hard to build or would like to free yourself from some of the bad debt which has accumulated in your life, you will be able to make the decision to refinance, and be sure you are getting a loan which really does suit you and your current financial situation because you are now holding all of the answers.