How to Make the Most of Refinancing

Firstly, let’s start with the basics: what is refinancing?

Refinancing allows a borrower to move from an existing home loan agreement to a new one. This can be done for a number of reasons – to get a lower interest rate, switch from a variable rate to a fixed rate, or to consolidate debt into your mortgage – but commonly borrowers are refinancing to save money on interest payments.

Refinancing has been a bit of a hot topic recently, with rising interest rates causing many to worry that their home loan repayments may balloon to unaffordable levels. In the current environment, many borrowers are opting to engage a mortgage broker to help them refinance in the hopes of some relief from the rising costs associated with their home loan. For a breakdown of how a typical refinancing scenario plays out, see Mark Bouris’ analysis here.

We asked our branch principal and mortgage broker at YBR Noosa Heads, Bryce Quirk, to share his experience of helping numerous clients to refinance and to walk you through the process in simple terms:

Myth busted: Refinancing is too difficult

“I think one of the more common misconceptions out there about refinancing is how difficult it is,” said Bryce.

“It’s actually not that difficult. Particularly given that when you work with a mortgage broker, we collectively manage the process for our clients, so we do the bulk of the heavy lifting.”

“Yes, as a customer you will have to gather some documentation and provide it to me, but once that document gathering process is done, it’s a pretty straightforward process for our clients.”

“Generally, refinancing may take three to four weeks to finalise a deal, so as long you understand the timeline around refinancing, which I always walk my clients through, then you as a borrower can be assured that your broker is working away in the background to get your deal across the line and to help ease the stress off your shoulders.”

“Despite recent years where, at certain points, turn around times with lenders deteriorated significantly, we’ve rebounded and turn around times are now quite efficient, so customers who have already or who are looking to refinance can be confident in the fact that utilising a mortgage broker is the right step to put their best foot forward.”

What does the process look like?

Whilst the exact process to refinance may vary, Bryce shared insight as to what a typical client of his will experience when refinancing:

“Firstly, I’ll sit down with you and talk through your goals and circumstances so that we’re all on the same page. Particularly, I always want to ensure that I know exactly what it is you’re trying to achieve with your property goals.”

“After we’ve had a discussion and we decide that refinancing is the appropriate route to take, I’ll issue a credit guide and privacy statements, I’ll request some documents from you and I’ll start to shop around on your behalf for suitable products.”

“With my client’s, I always have a good idea of their serviceability levels, or what they can afford to repay. Once I’ve reviewed the documentation, I’ll be able to assess whether there is a better option out there for you and at this stage I’d normally provide a few options back to you to make a call on.”

“As far as the documents you may need to provide, it’s not too dissimilar from the kinds of documentation you have to provide when you first apply for a home loan. I usually request your last few pay slips, some formal documentation around your existing home loan, a bank statement, and a guide on your expenses. For my existing clients, I have documentation on file that will expedite this process.”

“Of course there may be fees associated with refinancing, but in my experience, the fees are not really a barrier preventing people from refinancing, provided that the real time savings are there.”

“A good example would be some of the refinancing cash back offers that are being offered by various lenders. A fair amount of lenders are offering cash back deals to entice customers to refinance, and sure, you have to be cautious about these and make sure that the rate offered and the cost over the life of the loan is competitive and suitable for you, but if the overall deal is competitive, and the cashback really is just a sweetener, then it’d be silly not to take that offer.”

“If a lender has a competitive rate, if it’s not going to cost you any more over the life of the loan, if you’re getting a cashback deal to refinance, and the loan package is suitable to your specific circumstances, than it’s a no-brainer to take a cashback deal, particularly when some lenders are offering $3000 or $4000 in cashback.”

What have other borrowers been experiencing through refinancing?

We asked Bryce whether there was a reluctance from customers to refinance because they feel like it might be a hassle: 

“Definitely not,” he said. 

“With refinancing, it may be a little different to a first home buyer, because as a broker, I may have to stay on top of the customer a little more than usual, to make sure I receive the necessary documents. However, particularly now, if customers are going to save money on their home loan, there’s definitely no reluctance.”

“We’ve had several clients who were very proactive with their mortgage and came in a few months ago to refinance to a fixed rate into next year. In those cases, we’ve marked a time to sit down and review their loan next year, which means they’re in a very strong position to ride through the interest rate rise environment we’re currently experiencing.”

Bryce’s tip for borrowers

“Check your rates and contact a broker.”

It’s a simple yet very effective tip to put yourself in a strong position to manage rate rises. Bryce said, “Unfortunately a lot of homeowners don’t check their rates, or they’re not very proactive with their mortgage, and they’re the ones who feel the pinch.”

“If you’ve engaged a mortgage broker before, they will no doubt be in touch with you when rates change or if they think a better deal might be available to you. However, if you’re trying to ride this period out alone, you are potentially missing out on the best home loan out there for you.”

When it comes to refinancing, mortgage brokers can be extremely helpful in ensuring the process goes as smoothly as possible. They can help you compare different lenders and offers, provide advice on the best package for your needs and help you through the entire process. This can save you time and money, and make the whole process much less stressful.

Reach out to us today to get in touch with an experienced YBR Home Loans mortgage broker who can ensure you get a fair deal!