Although you may have been able to get a home loan previously, it does not guarantee that you will be approved if you were to refinance your home. So what does your lender want to see to be able to approve your home refinance?
Here’s a simplified list.
Adequate cash flow
Whether you are getting your initial loan or refinancing an existing one, one of the first things that a mortgage lender is going to do is check your serviceability. Before approving your application, the lender will need to ensure that you have adequate funds to meet the home loan repayments. This is done by assessing your regular income and comparing it to living costs and all financial commitments to see if you have surplus funds available.
Each lender may have their own lending requirements, so it is important to fully disclose all relevant information in the beginning. If your lender discovers relevant information that you did not disclose, it could slow down the application processing time and may even affect your borrowing power.
Appropriate assets and liabilities
Both your assets and liabilities can affect your borrowing power. Your assets could help improve your serviceability whereas your liabilities can hinder your application if you have too many.
Before refinancing your home loan, it would be beneficial for you to reduce your liabilities as much as possible. For example, if you have credit cards, personal loans or car loans, try to reduce the amount owing as much as you can as this could improve your borrowing power. Remember, even if you have a credit card with $0 owing, the lender will still include the limit in their calculations, so if you don’t need the credit card, cancel it.
A good history of making payments on time
In March 2014, Australia will be changing to a positive credit reporting system. This means that not only will lenders be able to see credit defaults; they will also be able to see the past 24 months of your repayment history (going as far back as December 2012).
So, if you have not been repaying bills on time or have missed repayments, the lender will be able to see this. This could have a detrimental effect on your refinance application if you have not been attentive with your current home loan.
Before refinancing, it would be worthwhile to check your own credit report to ensure all information is correct. This can be done by visiting the Veda website.
State Custodians Home Loans for Home Refinance
One of the most common loans used to refinance an existing loan is the Standard Variable Offset Home Loan. It has very attractive interest rates and award winning features. Click on the link for details. Should you have a smaller loan, a Breathe Easy Offset Home Loan might be best for you. It has no upfront or ongoing regular fees, but a slightly higher interest rate. Both have the same features when it comes to function. Give us a call and we will help you work out which is best in your situation.