Essentially it is the process of moving your mortgage from your current lender to a new lender. You pay off your existing mortgage and take up a new mortgage with the new lender.
- To get a better interest rate.
- To release equity from your home to fund investments, renovations or lifestyle.
- To consolidate debt. Particularly if you have multiple liabilities like credit cards, personal loans or tax debt. Often it makes sense to refinance them into your mortgage and pay home loan interest rates for the total debt.
- To release equity to fund a renovation of your home.
- To reduce your loan repayments. When you refinance you generally start a new loan term.
- If your current loan is with a specialist lender and you want to place it with a more mainstream lender
- A loan application fee from your new lender. The amount varies between lenders but is generally in the range of $150 – $750.
- The new lender may require a valuation on your property to confirm its value. A bank valuation normally costs between $100 – $200.
- A mortgage discharge fee. Generally between $150 – $400.
- Lenders Mortgage Insurance (LMI) if your new loans Loan to Value Ratio LVR is above 80%.
- If your current mortgage is on a fixed rate you may be charged a break fee for early exit of the mortgage. These break fees can be quite large, particularly during a falling interest rate cycle. It is important to clarify if you are subject to a break fee with your current lender.
- Early exit fees. These have been banned since 1st July 2011. Having said that if your mortgage was established prior to 1st July 2011 there is a possibility that your current lender still has early exit fees in place. Once again confirm with your current lender.
One of the big advantages of working with a broker is that he will confirm all of these potential costs before creating your credit proposal.
Generally allow 4 to 6 weeks. We make sure our clients complete their discharge authority as soon as possible so we can get it in to their current lender nice and early. This minimises any potential delays at your current lenders end of the deal.
This calculator will allow you to estimate just how much you are likely to save when you refinance your home loan. It takes into account the end/break fee from your current loan as part of the calculation.