First steps to refinancing your home loan
06 December 2022
Step 1: What to consider when refinancing your home loan
First steps to refinancing your home loan
Refinancing your home loan can be a life-altering venture with many highs and lows along the way. Either way, we're here to help simplify the process.
Here are some key points to consider when refinancing your home loan:
- Understand if early termination fees might apply
- Know how much you could potentially save over the life of the mortgage
- Research what other home loans are available
- Do you want to shorten or extend your home loan term
- Are you wanting to consolidate multiple debts
- Know if you're freeing up equity for a new purchase
- Understand what your new monthly repayments will be
- Know what your settlement costs will be and what government fees will apply
- Decide if your new home loan will be fixed, variable or a combination of both
For tips on how to pay off your home loan sooner check here
Step 2: Understand what home loan refinancing is
Home loan refinancing involves negotiating a better deal with your current financial institution or taking out a new home loan with a lower interest rate to help you save on your monthly repayments. It's a good idea to have an annual health check on your home loan to review whether the interest rate and loan features are still suited to your needs.
Some great reasons to refinance include:
- Save money on your monthly repayments with a lower interest rate
- Consolidate your personal loans, credit cards and other debts into your home loan. While you'll be paying a lower interest rate, making extra repayments to your home loan will help you pay it off sooner
- Access the equity in your home for investment purposes, renovation or to achieve your personal goals
- Take advantage of loan features that can add flexibility to your home loan
To find more information on home loan refinancing check here
Step 3: Know what costs are involved with refinancing
Your upfront and ongoing costs
When refinancing your home loan it's important to consider all your expenses, including not only the more obvious upfront costs, but also the ongoing costs too.
Upfront costs:
- Exit fees - otherwise called discharge fees
- Break fees - otherwise called mortgage deregistration fees
- Start-up/ new home loan application fees
- Lender's mortgage insurance - insurance that credit providers take out to protect themselves should the loan not be repaid
- Stamp duty - when refinancing you may be liable to pay stamp duty. We've got our stamp duty calculator here
- Settlement fees
Ongoing costs:
- New monthly mortgage repayments
- Direct debits - when switching lenders be mindful to also update any existing direct debits, as failure to make payments could result in last fees
Find more out about stamp duty here
Step 4: Choosing your refinancing home loan
Choosing the right refinancing home loan is just as important as finding your home. Your refinancing home loan needs to have all the features that suit your individual needs.
Some considerations to keep in mind when selecting your refinancing home loan:
- Principal and interest loans
- Interest only loans - many investors choose this option, however the principal will need to be paid down over the life of the loan
- Split loan - when a portion of your loan is fixed and a portion is variable
- Fixed rate loans
- Variable interest rate loans
- Redraw facility - have access to extra repayments on your home loan when you need it
- Mortgage offset - reduce the interest you pay on your loan by keeping your savings in a mortgage offset account
For tips on how to pay off your property sooner check here
Step 5: Application for your refinancing home loan
When you're applying for a refinancing home loan the lender will assess you on many factors. One factor will be what equity you currently have. The assessment will be broken down into three categories; what you earn, what you owe, and what you own. Your eligibility to qualify for refinancing will also take into account the specific home loan you're applying for.
Some of the factors your lender will assess you on during your refinancing journey:
What you earn
- Salary
- Investments
- Rental income
- Government income
What you own
- Savings
- Substantial personal assets eg. a car or home
What you owe
- Credit cards or loans eg. students debts, leases, other mortgages
Here are some important documents you'll need as proof of identification:
Primary identification
- Current drivers licence and/or current passport or birth certificate
Secondary identification
- Council rates notice, credit card, debit card, Medicare card, health care card
For more tips about equity when investing check here
Step 6: Other considerations when refinancing your home loan
When making the choice to refinancing your home loan there are some other considerations you may want to think about when making your final decision.
Some considerations to keep in mind when selecting your refinancing home loan:
- Making additional repayments - could be another way to help you save on interest over the course of the loan and also another way to help you pay off your mortgage more quickly
- Repayments frequency - understand if making payments more regularly (weekly or fortnightly) if better than making the standard monthly mortgage repayment
- Consolidate your loans - it's probable you'll save money if you're only paying one set of fees and charges
For tips on how to pay off your property sooner check here
Step 7: How to refinance your home loan with BOQ
Compared to the first time you applied for your home loan, refinancing your home loan is a much easier process. Here's a simple breakdown on the home loan refinancing process:
- Get started online - starting your application process couldn't be easier. You can also visit your local branch or call us to chat to our home loan experts.
- Loan application - we’ll guide you on all the necessary information and documentation you need to complete your loan application.
- Loan approval - once your loan has been approved, it's time to notify your current lender that you will be discharging your home loan.
- Loan settlement - we will meet with your current lender for the home loan settlement.