Refinancing – how to break up with your current bank
As your fixed interest rate terms come up for renewal (and with home loan interest rates hitting record lows) you’ll want to make sure you have the best possible rate. But what if the best rate is with a different bank? How do you break up with your current bank without making a scene?
From a legal perspective, we call this a refinance because we will be repaying your current home loan and changing your finance to a new lender.
Your first step is to sort the details with your new bank. Just like when you arrange finance to buy a house, you’ll need to provide financial information, proof of insurance, and possibly valuations. Many people coordinate this through a mortgage broker, who helps you contact banks, decide on the amount to borrow, the loan structure and interest rates, or you can do it directly with a mortgage manager at the new bank.
You don’t have to borrow exactly what you currently owe; you may be able to borrow some extra funds to free up some extra cash to pay for those renovation jobs you’ve been meaning to do, or you could consolidate some debt by paying off a car loan or credit card.
Once the detail is agreed with the new bank, they’ll ask for your lawyer’s details. Clients are often surprised to learn they need a lawyer to help with the process. Here’s why we lawyers are involved:
- Banks require you to get legal advice on your loan documents before signing them.
- We handle receipt of the new loan funds and the repayment of your old home loan.
- We handle the removal of the old bank’s mortgage from your property’s title.
- We register your new bank’s mortgage on your property’s title.
One of the advantages of this is that you don’t need to tell your current bank you are leaving them, we take care of this step for you. The old bank just sends us through a final notice of how much we need to pay – without any awkward conversation.
The turnaround time for a refinance, from us receiving your new loan documents to completing the refinance and registering the new mortgage, can take as little as 3 working days (depending on the bank’s workload).
How can you make this process as easy and painless as possible? Give us as much notice as possible. As you can imagine, there is a bit of admin to do behind the scenes, so we appreciate the heads up!
If you’re thinking about trading in your bank for a newer model, get in touch and we’d be happy to take you through the steps in more detail. Many banks will even provide a cash contribution towards legal fees!