How to refinance your home loan

Thinking about refinancing your mortgage? We outline the key steps involved in getting things underway.

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.

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.

You can also use our split loan calculator to find the best combination of fixed and variable interest rates to suit your needs, and our refinance calculator to calculate how much interest you could potentially save by switching your home loan to us.

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 start your application online and see your eligibility, or to book an appointment online, go into a branch, meet with a mobile lender or apply 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.

5. Settlement

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.

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.

Source Commonwealth Bank