Step-by-step guide to refinancing

By Nila Sweeney
Step 1: Explore the costs
  • What exit fees or penalties will be payable to your current lender – such as deferred establishment fees (DEF) – when you refinance? If you refinance to the same lender, the DEF is usually waived.
  • What upfront costs do you have to pay to establish the new loan?
Step 2: Check your motivation
Why do you want to refinance? Is it to access:
  • a lower interest rate
  • equity
  • switch to a different product that your current lender won’t provide
  • streamline all of your loans to one lender?
Step 3: Choose the right mortgage
This is your opportunity to find the best deal on the market.
  • Create a ‘shopping list’ of the features you want
  • Meet with your mortgage broker to discuss options
Step 4: Apply to refinance
Once you’ve decided on the loan you want, you need to submit an application. This process is similar to when you applied for finance the first time around, unless:
  • you’re refinancing with the same bank – in which case, you won’t need to provide as much paperwork
  • your credit record has been impaired
  • your income stream has changed
  • your liabilities have changed
  • you have no equity in your property
Step 5: Inform your current lender 
If you are refinancing to a new financier, you need to inform your current lender of your decision to refinance, so they can forward all required information to your new loan provider.

Step 6: Pre-approval 
The new lender will take between a few days and a few weeks to process your refinance application.

Step 7: Valuation 
Your new lender will arrange to value your property or properties if you have more than one. Generally, the first valuation is free, but the lender will often charge $200–$300 for valuations on any additional properties.

Step 8: Finance approval 
At this point your lender will advise you in writing of your loan approval – this is generally called formal or unconditional finance approval. Your broker or lender will then instruct a solicitor to prepare the loan documents on their behalf.

Step 9: Legally binding 
The loan documents will be sent to your solicitor for review, and for you to sign. Alternatively, you can go over the contracts yourself, thoroughly reading the specifics about your individual mortgage arrangement.

Step 10: Arranging settlement 
Your new lender will arrange both settlement of your old loan with your previous home loan provider, and the establishment of your new loan. This involves exchange of titles and the bank’s registration of the mortgage over your property.

Step 11: Draw down 
You now have a brand new loan! You should receive details on how to manage your new loan, along with all of your new account information, within one week.