If you’ve considered refinancing a home loan, you might have a few questions, with “how long does it take to refinance a home loan” as one of the main ones. Like many things in the finance world, there isn’t one firm answer to this question. The answer to these questions will vary between lenders and specific factors on your application.
If you’ve got questions about refinancing your home loan, read on for advice from our mortgage brokers.
What is refinancing?
Put simply, refinancing is when you switch from one loan to another to put yourself ahead financially to help you achieve your goals or as your circumstances change. When you take out a new loan with your existing lender or a new lender, it’s referred to as refinancing.
How long does it take to refinance a home loan?
As with any other financial situation, how long it takes to refinance your home isn’t set in stone. Depending on your lender, refinancing can take anywhere between a few days to six weeks.
Various factors can influence how long it takes for your refinancing application to be approved, including the following:
- How quickly did you submit the required documentation
- Level of detail in your application
- Strength of your application (e.g., credit score)
- How fast your lender reviews the application
Some other factors can slow down the refinancing process. These include:
- Making errors in your application
- Forgetting to submit the required documents
- Your lender requires additional documentation
Why should you consider refinancing?
There is an abundance of reasons why you should consider refinancing – the main one being that your home loan simply may not be the best suited to your circumstances anymore. Some other major refinancing considerations when looking for a new loan include:
Lower rates and fees
The very first thing your mortgage broker will discuss with you is whether you could be paying less. A loan with a lower interest rate or fewer fees can be the simplest way to reduce your repayments. It means you can unlock a bit more spending money or, better still, pay off more of your principal to pay the loan back sooner.
When refinancing, you may look for a lender that allows you to have an offset account. This is a separate account that lets you use the balance to offset the principal on which your interest is calculated. Having your wages deposited into this account can take time off your loan.
Another feature some lenders may offer is the ability to make additional repayments. Paying more money into the loan if you have it is a great way to shorten your loan and save more in the long run.
Redraw accounts are popular features of some home loans. This lets you easily access any extra funds you have deposited into your loan.
Lastly, the appeal of flexible rates may be one reason to refinance. Depending on what you think rates are going to do (go up, go down, or remain the same), you can choose the type of loan that could save you money when they do go down or protect you if they were to increase.
How much does refinancing cost?
Unfortunately, the good things in life aren’t always free. However, spending a small amount on refinancing can create significant long-term savings on your home loan. Once you know what costs are involved in ending one loan and moving to another, you can weigh up the benefits of switching loans.
Your Inovayt mortgage broker will discuss with you any fees you may incur for refinancing. However, here are some of the common ones.
- Discharge fee – some lenders may charge you a termination fee.
- Settlement fee – a fee charged once the loan is settled.
- Registration fee – charged when you switch your mortgage to a new lender. This amount varies from state to state.
- Lender’s Mortgage Insurance (LMI) – If your new loan is worth more than 80 per cent of your home’s value, a lender will ask you to pay this to protect them from defaults.
While most lenders won’t always charge you all these fees, our Inovayt mortgage brokers can help you understand what it will cost to end your current loan and begin the new one.
When should I be refinancing a home loan?
Although it takes time to review your home loan, not doing so means you might miss out on some significant savings.
You should be looking to review your home loan every two years or in any of the following circumstances:
- You’re offered a pay rise or a new job
- You have lost your job
- You begin growing your family
- Your children start to support themselves financially
- Increasing or decreasing property values
- You’re at the end of a fixed rate period
- Interest rates change
Refinancing a home loan with an Inovayt mortgage broker
When refinancing a home loan, you need to know exactly what’s out there in the market to understand your options. Mortgage brokers like us can help. Being your mortgage broker means we’re on your side and are advocating for the best outcome for you.
We have a comprehensive understanding of the current market and can offer a wealth of information and expertise for you to draw upon. Apart from helping you find the right loan, we’re here throughout your refinancing journey to make the whole application and approval process much more manageable.