Changes by the Australian Federal Government to laws affecting lender’s ability to charge early exit fees and to simplify the movement of transaction account/ auto payments etc between banks means that in may ways a home loan refinance is more painless than ever. But of course the government gives and the government taketh away and the National Consumer Credit Protection ACT (NCCP) means that documentation requirements and procedures are more onerous that ever.
Why do people refinance their home loan? Usually in order to get a better deal and/or a better product, but alas it is quite often as a result of a bad experience with their current lender. According to independent surveys most of the big banks have over 20% of their customers less than satisfied at any given time compare this with lenders like Heritage at 92% satisfied (April 2012) followed closely by ING and meBank (Members Equity). This is part of what we take into account when making a recommendation after all we rely heavily on repeat and referred business and we only get that when you, our client are happy with the outcome that we arrange.
None the less that should not deter you as there can be potentially tens of thousand of dollars that can be saved by a sensible move. The difficulty for the average punter is accessing all of the information required in order to conduct an accurate comparison … that is where we come in.
What we don’t know, we can find out because we have access to the lender’s internal broker web sites and access to broker support staff. We also cross reference that with a number of tools to ensure that the information we are working with is as accurate as possible and then we can do the figures – see my article on cost of loan comparisons.
For a refinance generally we need to see your income documents, payslips, rental statements etc and loan statements for the last 6 months of the property/s being refinanced. We will also need council rates notice for each property and recent credit card and other commitment details.
There is no need for you to contact your existing lender, although it may be a good idea to call them and ask to check if there are any exit fees (pre-ban) that still apply to your loan. The other costs will be any applicable application fees, government registration fees, valuation and legal costs. Sounds intimidating however we will be taking all of this into account and we will not recommend a refinance unless there is a clear, direct benefit to you… in fact this is a requirement under the NCCP. The truth is that with most of our lenders ( that we would recommend) these extra costs are usually built into a single upfront fee typically $600 or an annual fee for packaged loans – typically $300 pa.
A refinance can be quick – say two weeks, but that is an exception. There is no incentive for the old lender to cooperate and they can take 10 days just to arrange the loan discharge – a process that can’t begin until you have signed and returned the mortgage documents. So it is best to allow around 4 week for a full mortgage refinance. As I said to one of my clients recently, lenders who are offering fast turn around are doing so because they are not bust …. it is not usually too difficult to figure out why they aren’t busy.