Refinance Home Loan Frequently Asked Questions

Aug 25, 2020
Refinance Home Loan Frequently Asked Questions

1. How long does it take to refinance a home loan in Australia?
In Australia, on average, it takes about 30 to 45 days to refinance a home loan. But in case of any obstruction in the way, it can be stretched up to 60 days.

Refinancing a home loan takes time and doesn’t happen instantly.
This time taken is because of the several steps such as researching, applying for the loan, receiving estimates and disclosure, loan processing, appraisal, underwriting, and closing are included in the refinancing process.

Despite all this time and energy consumed in refinancing, it is worth considering if you want to lower your interest or need to withdraw some cash from home equity.

2. How much does it cost to refinance a home loan?

The cost to refinance when paid upfront looks like a hefty amount, but it can be recouped within months of refinancing.

You’ll be paying the fees at various stages. First, you’ll need to pay a discharge fee to your old lender to cover the cost of closing your loan. It will be around $100-$400.

Then you’ll need to pay setup fees to your new lender, who will cost you $300-$1000. Next, you’ll need to pay the standard valuation fee, which costs $200-$500.

Make sure you pay these fees upfront, or it’ll add to your loan, and you’ll be paying interest on the added fees too.

3. How do you determine if I should refinance my mortgage?

This is very important to evaluate before you decide to refinance your home loan.

It depends on many factors, such as the amount of your loan, the interest rate you are offered, time remaining in your loan, etc.

It would not make any sense going through all that hassle if the benefits you are receiving were canceled out by the fees you pay for refinancing. Reach out to the lender and ask for his advice.

First using refinance home loan calculator, calculate the cost, to get a proper evaluation of your mortgage. This will help you determine if you should refinance your home loan.

4. How do you get money from refinancing?

You can get a cashback or cash out from refinancing your home loan. You can also get some amount out of the loan to pay your other debts.

For example, if your credit card company charges a 10% interest rate and your home loan is at 5%, pay your credit card bill from the home loan.

With this, you can save a considerable amount of money over a long time. But this is only possible if you pay your mortgage on time every month.

5. What should I watch out when refinancing?

Most people will simply go to their regular bank for refinancing, and this is the first thing you need to watch out.

It is advised to you that if you are planning on refinancing, get in touch with multiple money lenders, and inquire about the costs.

Do not just grab the offer with the lowest interest rate; compare the total amount that it will cost you, including the interest, closing fee, setup fee, evaluation fee, etc.

In some cases, interest may seem low, but it gets outweighed by the high refinancing charges and might cause you loss instead of profit.

6. Do you need a down payment when you refinance?
There is no need for you to pay any down payment to refinance your home loan.

The only charges that you will be paying for refinancing is the closing fees to the old lender and setup fees to the new lender.

There are some other fees too that you’ll need to pay for refinancing your home loan.

7. Is mortgage refinancing worth it?

The answer to this question is not as simple as the question.

To know the worth of refinancing your mortgage, you need to understand that it depends on various factors such as how long the loan is for and how many years have been passed, the rate of interest in the market, and the rate you are paying for.

After calculating everything, including the refinancing costs, if you are eligible to get a benefit worth the hassle, refinancing is worth it.

8. Is it cheaper to refinance with the current lender?

On some occasions, it can be a smart move to refinance with your current lender if he offers to cut the closing fees or setup fees and offer you a lower interest rate.

However, sometimes he might offer you a lower interest rate without refinancing, but he will surely charge you for the documentation fees.

In case your current lender offers you such benefits, stick with him, but in case he refuses any such offer, it is better to check out the market for other lenders who might offer you cheaper offers.

9. How much will I save if I refinance?

Refinancing, when done right, can help you save a considerable amount of money that you were going to pay as interest otherwise.

To find out the exact amount that you can save if you refinance, you can use one of the various mortgage refinance calculators available online.

They will need you to enter the details of how much loan you owe to the lender and when the loan initiated, the time period of both pre and post refinance mortgage, the interest rate you were paying before, and the new offered interest rate.

Once you fill all the details, it will give you the exact amount that you will be saving.

10. What happens when you refinance your home?

Refinancing may sound like a very complex thing, and yes, it is, but the concept of refinancing is as simple as it gets.

Refinancing a home loan implies that you take a new loan from either the same lender or another lender and pay off your existing loan.

This lets you change the terms of the existing mortgage on your home, and you don’t have to pay extra interest.

Refinancing can be of two types, rate and term, depending on what edit you want to make in your loan conditions.

11. What documents do you need to refinance?

There are seven documents that you’ll require to refinance. These documents are listed below:
a. Proof of your income
b. Documents related to your homeowner’s insurance and title insurance
c. Recent credit score and credit report.
d. Your monthly debt load, including your student loans, auto loans, current mortgage, credit cards, etc.
e. Total assets including savings account, stocks, bonds, CDs, and mutual funds
f. Appraisal of the house
g. Loan to appraisal value

12. What company is best for refinancing?

If you are willing to refinance your home loan in Australia and are looking for a lender, you need to reach out to Loan waves.

They have a team of highly efficient brokers dedicated to helping you in finding the best deals for refinancing and have loan offers starting from interest rates as low as 2.19%.

Loan waves is a licensed company with a significant number of satisfied customers.

Their team of brokers specialist in mortgage matters will assist you in choosing the right option that suits your situations and benefits you the most.

13. What are the benefits of refinancing a home?

There are numerous answers to this question, and some of them are listed below:
a. With a refinancing, you manage to get a better mortgage rate
b. A lower monthly interest rate achieved by refinancing can significantly reduce your monthly payments.
c. If you have an adjustable-rate mortgage, you can refinance to a fixed-rate mortgage, and this way you won’t have to be worried about the increase in monthly payments.
d. You can initially start with a 30-year mortgage and later refinance it to a shorter period, hence saving a lot of money on the interest.
e. If you need some money for a purpose such as a house remodelling, you can opt for cash-out refinance and borrow the money.

Some Useful Resources:
1. How to Refinance a Home Loan – Step By Step Guide