3 min read | 28 Mar 2019 | Mira Hohn
Thinking of refinancing your home loan? If you aren’t sure if it’s right for you or not, check out our last post (10 reasons to refinance your home loan) giving you a whole load of reasons why it might be a sweet idea.
If you have already made up your mind you want to refinance, then you need to know it’s not necessarily as simple as just swapping from one bank to a new lender. It’s pretty much asking for a new mortgage, and as such, you will have to have all your ducks in a row before you apply. But don’t stress, we’re here to help you make it easier for everyone.
Depending on where you go to refinance, you will also need to factor in the cost to switch.
But not if you decide to refinance through Athena. No fees. WTF? Yep. None. No account keeping fees, no switching fees, no redraw fees, and no exit fees. We do need to pass on a couple of third party fees we get hit with, like valuation costs, third party legal fees or government charges, all of which are pretty low cost, but as far as Athena goes, we charge you nothing for our services.
It’s a good idea to work out in your own mind, how much you have paid off. How much is your home worth now? How much equity you have? This handy tool can help with a ballpark valuation. If you paid Lenders Mortgage Insurance (LMI), and still won’t have at least 20 per cent equity in your home, then you will have to pay it again. Sucks right? But that insurance is designed to protect the lender and not you, so you can’t take it with you. And it can be hefty, so make sure refinancing is what you really want to do. Sometimes it can be better to wait a bit. No point refinancing, if the money you’re saving in interest rates gets spent on insurance.
Why do you want to Refinance? Are you renovating, need a deposit for a new investment property? Or do you want a bucket-list holiday or new wheels? Want to switch to Interest-Only or Fixed rate? Or are you just sick of being screwed with your current interest rate and are looking for a better deal? All of these answers help you to identify what sort of new home loan product you are after. From there you can compare the interest rates of each product against what you already have.
Because Refinancing is effectively the same as getting a new mortgage, you have to show that you are a responsible borrower, so paying down credit cards and personal loans is a good idea. This is the PERFECT time to talk about the two biggest things you can do: (1) reduce credit card limits and (2) get to know and manage your expenses, especially the discretionary ones. If you can even ditch a card or two in the process then kudos to you. On the plus side, getting rid of other debt makes paying your mortgage easier.
Have all your paperwork ready. That includes payslips, home loan statements, personal loan, bank and credit card statements to show your spending. Thank f*** for the internet right? You should be able to pull all of this together with online statements.
Since the Royal Commission, lenders go through your spending habits with a fine tooth comb. They know when you bought five pairs of shoes in the sales, and that you like take aways four nights a week, so think carefully about your “tap and go” spending because it’s all itemised, and try to simplify it if you can. You will also need the usual ID documents.
Not a philosophical statement. We mean literally ‘get your house in order’. Lenders will want to value your home. Most of it is done online, but they also send humans out to look at your home. Don’t worry they aren’t there to judge your taste in soft furnishings ala Shaynna Blaze, just to confirm your home matches their online valuation. Once you have got everything together, painful though that may be, then you should be prepared for a relatively smooth application process.