Refinance your Home Loan
Refinance today and save thousands
Refinancing your home or investment loan does not need to be complex. Principal Mortgages has helped thousands of clients move their home loan to a new lender in order save lots of money on interest. Our process is streamlined, our service is professional and our testimonials on google continue to confirm this.
Below we have provided answers to the most commonly asked questions. Please reach out to us using the contact form and let us help you save thousands.
How much does it cost to refinance?
On average refinancing will cost you $800 per property being refinanced. However many lenders now offer a cashback incentive of up to $4,000 so most people actually make money by refinancing. The new lender usually pays this cashback 30 to 60 days after settlement.
When refinancing you will need to pay the following charges:
|Existing Lender||Existing lender will charge you a discharge fee. This fee is usually $350 per property but each lender differs as some lenders may charge the fee per loan (not common). Best way of confirming this fee is to ask your current lender. If you have a fixed rate loan there may be a break fee which only your current lender to calculate. Best way of confirming this fee is to ask your current lender. There is no exit fee for variable loans.|| $350 per property |
(assume no break fee)
|Office of State Revenue||Office of State Revenue will charge you a fee to remove the current mortgage on the property and add the new mortgage for the new lender. This fee is currently $165.40 for the removal and $165.40 for registering.||$330.80 per property|
|New Lender||The new lender may charge an upfront fee to cover the valuations, legals and settlements. Most major banks do not charge upfront fees but best to confirm with your broker or new lender||$100 (assumed)|
|Cashback||Many lenders are offering a one-off cashback incentive to refinance your home or investment loan. These cashbacks are up to $4,000 depending on the lender. Whilst there are criteria to qualify for the cash back once it has been paid (usually 30 days after settlement) you have no obligation to stay with the lender||$2,000 cashback|
How much will I save by refinancing?
This depends on what interest rate you are currently paying. You need to differentiate between interest savings and reduced loan repayments. By refinancing you can usually obtain a lower interest rate (generally 0.5% lower) so this results in you saving interest and reducing your periodic repayments.
However when refinancing you also have the option of changing the term of your loan. Loans usually have a loan term of 30 years and when you decide to refinance you will usually have had the loan for a few years. Let’s assume you have had the loan for four years. As such you have 26 years remaining.
Now if you refinance and keep this loan term and get a lower interest rate you will save interest and reduce your repayments. However if you change the loan term to 30 years and get a lower interest rate you will reduce your annual interest charge and lower your periodic repayment even more but you will be paying interest for four more years so in the long term it could be costing you more.
We always recommend to our clients to keep the same remaining loan term as we do not want them paying more interest in the long term.
How long does it take to refinance my home loan?
It varies from lender to lender but the average time is 4 to 6 weeks. Some lenders are known to take ages to process loans while others are known to be much quicker. You also need your current lender to discharge your current mortgage and they have little incentive to do this quickly. As such some lenders can take 3 weeks just to release your current loan and mortgage.
We are aware of these delays and we make sure that we submit the discharge form upfront to avoid your current lender delaying the process.
Some lenders offer a service called Fast refinance. If this option is selected the new lender will pay out your current lender without arranging settlement. Once the loan is paid out the new lender will then request the mortgage from the current lender. The new lender takes out insurance in case they have a problem getting the mortgage as required.
The benefit of this service is twofold:
- It is much faster as the new lender does not need to wait for the current lender to be ready to settle
- By paying out the loan without telling the current lender there is no option for the current lender to try retain the client by offering the same deal
The downside of this service is:
- The new lender requires the new loan to be larger than the current loan as the payout needs to cover any interest owing and any fees
- There is usually a surplus of funds which gets paid to you a few weeks after settlement so you need to monitor this to make sure it gets paid
- If the new lender has a slow application process the refinance will stay take long irrespective of using Fast refinance or not
How will refinancing impact my repayments?
When refinancing there are a number of variables to consider that can impact your repayments. These are:
- Loan amount – is the loan amount staying the same or changing
- Interest rate – is the interest rate staying the same or changing
- Loan term – is the loan term staying the same or changing
- Repayment frequency – is the repayment frequency staying the same or changing
If the only variable that changes is the interest rate and the new interest rate is lower than the current interest rate your periodic repayments will reduce. If other variables also change then it is difficult to predict but your broker and/or new lender can advise you of the new repayment amount for different scenarios.
Does refinancing impact my credit file?
When you apply for any finance facility the finance provider will do a credit check to review your credit file. As such your credit file will show an enquiry by the new lender but this has little impact on your credit score.
What if I don’t like the new lender?
Refer to the question ‘How much does it cost to refinance?’.
If you have a variable loan the only lender fee payable is a discharge fee (usually $350). If you have a fixed rate loan there can be a break fee but you need to contact your current lender to find out if there is a break fee payable.
Is it easy to refinance?
The process of refinancing is basically the same as the process to purchase a property. The applicant needs to pass the servicing test and comply with the loan to value ratios of the lender. In the current environment (ie. interest rates increasing) refinancing is becoming more difficult as property values are decreasing and loan assessment rates are increasing (ie. people can borrow less). This is one of the key reasons a person should use an experienced mortgage broker as they can help the applicant navigate the various challenges.