Refinancing means replacing your existing home loan with a new loan. For example, you could refinance with your current lender or switch to a different one. Given the rising interest rate environment in 2022, many home loan borrowers have begun refinancing their home loans to save money on mortgage repayments.
No matter your objective to refinance, the most obvious question is: how long will it take to refinance a home loan?
This article will take you through a few tips and timelines for refinancing a home loan. Depending on the time, effort and documentation required, you can better plan your entire refinancing process.
Your current lender will already have a significant amount of your information on record. In such a scenario, the refinancing process could be faster than going with a different lender.
At the same time, the duration will vary depending on the criteria and processes of your chosen lender.
In general, when you refinance your home loan with a new lender, it takes around 4-6 weeks. Sometimes, it may take as short a week, depending on how your lender reviews your refinance application.
When refinancing with another lender, they’ll review all your documentation, personal details and financial information. New lenders typically provide a more accurate timeline based on their findings in these circumstances.
Once you know about the process of refinancing and how long it takes to refinance a home loan, you can better organise your finances and paperwork. This will ensure that the process is as smooth as possible.
Here is a general breakdown of the average wait times for the different stages of refinancing once you’ve decided to refinance your home loan and have contacted a lender:
Irrespective of whether you speak on the phone or personally visit the branch, this could take you about 20-30 minutes to understand your suitability for the new loan you are interested in.
You should be able to send your identity and financial situation documentation within 1-2 business days after your initial discussion with the lender. Organising these documents will help you transition to this stage much more smoother.
Your lender will organise a property valuation and inspection around the third day after you apply for a loan. The process can take differing amounts of time depending on whether it’s done remotely or physically.
If done remotely, the valuation can be completed in a few hours. However, the process generally takes 5 business days for a physical valuation as the new lender will need to coordinate a suitable date.
If all proceeds seamlessly, your lender will approve the loan. While the fast-track refinance could take as little as 3 days, the normal process for loan approval may take up to 2 weeks.
Once your loan is approved, your new lender will contact your existing lender to transfer the debt and property title. This settlement process can take a couple of weeks to complete. Again, it depends on the efficiency of both lenders since they need to coordinate with each other and have everything in place.
Our free online Home Loan Refinance Calculator can help you calculate how much you could save by refinancing and facilitate an informed decision.
As with all loan applications, several factors influence how quickly or delayed your refinancing application will take to be processed. Here’s a rundown of a few hang-ups to anticipate:
Your chosen lender may request more documentation; for example, they may seek older bank statements or credit card statements in addition to what you have already furnished.
If there are mistakes or gaps in your refinance application or some documentation is pending, this will cause a delay.
Pre-approvals help establish your financial position and indicate how much your new lender will lend you. Not having one can hold up the process, as your new lender will have to assess your current financial situation from scratch.
Loan approval can be tedious and time-consuming. However, mortgage brokers have access to a panel of lenders and can find you a better deal that suits your financial circumstances and goals.
Miscommunication between you, your broker, and your lender can lead to delays. Ensure all are on the same page before proceeding.
Refinancing helps you to save money on your old loan. So, securing a loan approval in the shortest time is often a priority.
Here are a few tips to help you get through the refinancing process as quickly as possible:
Whether it’s for consolidating debt, switching from a fixed-rate loan to a variable or accessing a lower interest rate, you should clearly understand your purpose for refinancing your current loan.
Likewise, setting a clear budget and financial goal can help you shortlist suitable loans. This will help you begin making repayments without feeling too much pressure.
Our Home Loan Comparison Calculator can help you compare different home loans side-by-side. This will speed up the process of refinancing your home loan because you know the most suitable product for your needs.
Having a good credit history may help fast-track your refinance application. It is advisable to check your credit report ahead of starting the refinancing application process. You could ask your financial advisor to guide you on the different options if you have a low credit score.
Request a mortgage statement to help you calculate how much equity and loan amount you need to refinance. This will give your new lender an idea of your current financial situation and help you secure approvals quickly.
A low DTI gives you a better chance of loan approval and a lower interest rate. In addition, knowing the DTI ratio limits of different banks and lending institutions can help you focus on mortgage lenders that best match your financial profile.
Similarly, as a borrower, you can reduce unused debt facilities like your credit card limit and/or eliminate non-priority expenses like eating out, gym memberships, and entertainment to improve your DTI ratio.
To calculate your DTI ratio, add all your monthly debts, i.e., credit card loans, mortgage repayments, personal loan, car loan and other debts. Next, divide the total by your gross monthly household income. In Australia, for most lenders, the acceptable DTI is now between 6 and 7.
There’s no substitute for a well-prepared dossier. However, you can substantially improve your chances of qualifying for a quick refinance is to present an error-free application, complete with all the paperwork, including your identity, employment and financial documents.
A home reappraisal can help you know the accurate market value of your home before you refinance. If the property prices have increased, likely the equity in your home has also increased. This gives you more options to refinance and at better terms.
Likewise, keep those contracts or receipts readily available to show the appraiser if you have renovated and permanently upgraded. Again, it will add to the value of your home and improve your chances of securing a competitive deal.
Getting pre-approvals can also speed up the process of getting refinance. Having a pre-approved home loan lets you know how much you can borrow. This gives certainty to you and the lender, fast-tracking the entire process.
Home loan refinancing can be a complex process. There are various products in the market, each with its own terms and conditions. Moreover, even if your application is perfect, delays can occur. Also, some lenders take longer than others to process applications.
For all these reasons, seeking professional help is a good idea. A reputed mortgage broker may be able to recommend specific lenders based on your requirements and profile.
For those looking to refinance their home loan as quickly as possible - within days rather than weeks - fast refinance may be an option.
With fast refinance, your lenders reduce the time taken to refinance by paying your old lender the outstanding debt before they get the title to your property.
However, your new lender may ask you to pay title insurance to compensate for this risk.
If you’re considering refinancing your current mortgage in the near future, Joust can help you compare and switch to a fair deal.
Our Instant Match tool gives you access to our partner lenders’ top three home loans on a safe and user-friendly platform.
Once you set up your profile and connect to suitable lenders, they will compete for your business by offering their best terms. This way, you’re more likely to bag a good deal on your home loan refinances.
The information in this article is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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