Whether you’re looking to save money, enjoy different features or consolidate other debts, there can be a number of scenarios where refinancing or changing your home loan is a good idea. If you’re confident it’s the right move for you, here are some steps to take to get things underway.
1. Assess your current situation
First and foremost you want to be clear on why you’re refinancing – what is it about your current home loan that isn’t working for you? Perhaps you’re after a lower interest rate or more flexibility. You may have to pay some fees (see below) to leave your current home loan, so being clear on the benefits your new home loan will bring can help you decide whether the switch is worth it.
2. Compare home loans
When looking at new home loans it’s important to compare more than just the interest rate. Look at all the fees and charges associated with the loan, as well as features and add-ons that are important to you, for example a redraw facility or offset account. A Key Facts Sheet can be very helpful with this.
3. Work out the costs and your borrowing power
Your financial situation may have changed since you took out your current loan, so take the time to work out exactly what you can afford. A lending specialist can talk you through each home loan in detail and assess whether a switch will help you save money over the long term. Some of the upfront and ongoing costs may include exit and break fees, new loan establishment fees, settlement fees and government fees and charges.
4. Apply for a home loan
Once you’ve found a home loan that best suits you, it’s time to apply. With CommBank you can do this online, in a branch, with a mobile lender or over the phone. Typically a bank or lender will assess your income and mortgage repayment history, as well as other loans and financial commitments. They may also complete a property valuation to work out how much your home is worth.
If your application is approved you’ll receive a letter of offer and contract for your new home loan.
When you’ve signed the loan contract, settlement occurs and your new home loan is used to pay off your current home loan. Your lender should submit a ‘Discharge of Mortgage’ form to the Land Titles Office in your state or territory to close your old home loan account. Your contract should specify when you need to start making repayments on your new home loan.