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The steps to refinancing your home loan
Refinancing your home loan is a fairly simple process, requiring the same kind of research and arithmetic you used when securing your home loan to begin with. Once you have ascertained that the rate you are paying is too much in the current market, or that the features of your home loan are not suitable for your lifestyle, or that you just feel it's a good time to look at your options: start the process.
How to shop around for a home loan
The comparison sites mentioned earlier – Finder, Canstar, Rate City and so on – are good places to get easy-to-access comparisons on the kinds of refinance loans available according to your position. IMB's products often feature in the top loans on offer. And, unlike many online-only lenders, IMB has been delivering personal service in our growing branch network for over 140 years. We have highly skilled Lending Specialists in our branches, and Mobile Lenders who can visit you at a time and a place that is convenient to you. No matter which option you choose they will spend the time with you to ensure you understand the process and the potential cost savings available to you.
What is the best home loan for refinancing?
There is no one-size-fits-all answer here. But, as we have covered in why refinance a home loan and when to refinance a home loan of IMB's Guide To Refinancing, here are some key questions to ask yourself:
- Compared to my current loan will the new loan save money now and over the life of the loan? Compare home loans for refinancing.
- Will the new loan take time off my home loan? IMB's refinance calculator can show you how much you will save on your monthly repayments and how much time you can shave off your loan. Our repayments calculator can show you the further savings and time saved by paying more than your minimum repayments.
- Will the new loan enable me to consolidate debt? Speak with the IMB team about your options for consolidating your personal loan or credit card debt on 133 462 or talk to a refinance specialist.
- Will refinancing free up equity, so I can renovate or purchase a car, holiday or an investment property? Speak with your accountant and/or financial planner to help you understand and make those decisions. The IMB Team can help you calculate the equity in your home.
- Will refinancing give me a loan with more features and flexibility like redraw and an offset account? Contact our team by calling 133 462 or talking to a refinance specialist.
- Is refinancing worth the costs for exiting one loan and acquiring another loan? Again, IMB's home loan refinance calculator will give you an indication of the fees involved and overall cost of switching. The IMB Direct team on 133 462 can help ascertain whether your Loan-to-Value Ratio will mean that you have to pay Lender's Mortgage Insurance.
Should I choose a fixed rate or a variable rate loan, or both?
If you are refinancing then, by definition, you already have a home loan. You will have had experience with either a variable rate loan, a fixed rate loan or a split rate loan in some way.
So, it will depend entirely on your circumstances and desires whether you prefer your new loan to be a:
Variable Rate Home Loan
The official interest rate moves according to various economic factors, including movements in the cash rate as set by the Reserve Bank of Australia and other market forces. Variable rate loan products generally have more flexibility such as the ability to make extra repayments, and options such as offset accounts and redraw facilities. However, don’t forget that variable rate loans can go both up and down over the life of your loan. Compare refinance home loans.
Fixed Rate Home Loan
A loan where the interest is set for an agreed period of time, usually 1-5 years. Fixed rates offer repayment certainty for the period of the fixed term. If interest rates rise, you will have the advantage of being on a lower fixed rate. But if they fall, you won't benefit from the lower rate. See if a fixed rate loan may work for your circumstances. Compare refinance home loans.
Split Rate Home Loan
As the name suggests, you can set a portion of the loan amount to a variable rate loan product and the other portion to a fixed rate loan product. This offers a combination of certainty with some fixed repayments and the features and flexibility available to variable rate loans.
Speak with your bank
Once you have a good idea of what is available, consider speaking to your bank about your home loan rate. Keeping your business is important to any financial institution because garnering new business is a more expensive process than retaining your business. A simple conversation can improve your variable home loan rate, or increase flexibility and added features like fee-free redraw and offset account options. Of course, often banks won’t allow fee-free breaking of fixed loans because, as detailed above, there are large costs incurred.
Already an IMB home loan customer? Contact us for a Home Loan Health Check so that we can give you peace of mind that your home loan is working for you. Fill out the online enquiry form or call the team on 133 462.
How to apply for a new home loan
Now that you have decided on a lender and a loan that works best for you and your goals, it’s time to apply. This process is like applying for any home loan. You will need to supply personal identification, financial information and property information so that the lender can accurately value your property. The difference here is that you’ll need to supply details of your current home loan, so that the lender can see your repayment history and how much you have outstanding.
How much does refinancing cost?
Exit fees
As mentioned in why refinance your home loan and when to refinance a home loan, onerous exit fees were abolished in 2011 to stimulate the kind of competition we enjoy today. However, if you settled your home loan before June 2011 you may be required to pay an exit fee when paying out your loan before the end of the loan term. Speak with your bank about your situation, or IMB can investigate it with you.
However, there is still often a “discharge fee”. These can cost anywhere between $0 and $1000 but average about $300.
Of course, if your home loan interest rate is fixed and you still have time left on the fixed term of the loan, you may have to pay "break costs". These can be significant depending on your loan and how long you have left in the fixed period.
Application fees
When applying for a new loan there may be an application or settlement fee that is payable to establish the loan. Consider these potential fees and compare them to the possible long-term savings gained by switching mortgages. It is important that you are aware of the fees when both leaving your old lender and moving to your new one. Factor these into your calculations if you do decide to refinance.
Finally, a registration fee for the new mortgage and a discharge fee on the existing mortgage will also have to be paid.
How to exit your home loan
Once your loan has been approved by your new lender – let’s say IMB Bank – we will contact your old lender and organise the discharge paperwork. We will take care of it from there. The process of settlement should only take a couple of weeks. Then, you can enjoy your new repayments, flexibility, equity – whatever you’ve aimed for.
At IMB, we can help you understand the terrain so you can make the refinance decisions that’s best for you. Have one of our lending specialists call you here, or call the team on 133 462.
