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How and when to refinance your mortgage

Follow these tips to get the most out of your mortgage.

Azal Khan

Digital Journalist, Your Money

Staying loyal to your lender could be costing you thousands of dollars each year as more banks refuse to reward loyal customers.

So how do you switch loans without the risk of getting rejected?

Marissa Shulze, a mortgage broker and director at Rise High Financial Solutions, shared her tips with Auction Day on how and why you can refinance your mortgage and save.

Shulze says banks traditionally reward new customers rather than rewarding customer loyalty.

New borrowers are paying on average 32 basis points lower than existing borrowers, which can add up to $1,300 on a $400,000 loan.

“One of the great reasons to refinance is the money that you can save, but there are actually many more reasons why consumers can consider refinancing in the current environment,” Shulze said.

“They can range from ensuring that they can do what they want to do, so that can include wanting to access some equity, or maximise their borrowing capacity.

“There’s such a variance between the different lenders at the moment with what they will and won’t do from a credit policy perspective, that your bank may not be the right bank for you based on what you want to achieve.”

Top tips to avoid getting declined

  • Use a reputable mortgage broker and make sure they do thorough calculations before submitting a loan application
  • Ensure you disclose all your liabilities to your broker upfront. Now with positive credit reporting, the banks can find everything and may decline applications where applicants have not disclosed liabilities
  • Protect your credit score. Avoid  pay day lenders, late payments and defaults
  • Maximise your borrowing capacity by reducing credit card and personal debt limits, and reduce your daily spending.

Shulze advises property owners to review their loans on a regular bases.

“A little bit like how you should be reviewing your insurance premiums annually, you should also be reviewing your loans at least annually,” she said.

“I don’t recommend refinancing annually, but it is important to keep on top of your loan, see what the interest rate is, and making sure you’re always getting a competitive rate.”

Steps to take to refinance

1. Be clear on why you want to refinance. Is it just to save money or is there another purpose, such as releasing equity or lengthening the loan term.

2. Work with a reputable mortgage broker and ensure they have done thorough calculations and checks before submitting an application

3. Prepare documentation for your mortgage broker

4. Submit the application

5. Once approved and new transaction account is established start transferring all of your automatic direct debits to your new bank

6. Allow 6-8 weeks for settlement

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