How Does Refinancing Work?

What Is the Process of Refinancing?

Refinancing is the process of replacing your current mortgage for a new mortgage in order to finance your home. This could be for a number of reasons such as a change in financial position, personal circumstances or getting a better deal on your home loan (lower interest, fees, repayments). However, there are costs to refinancing which is why it is important to ensure you are getting a better deal when you refinance. You can refinance to a different loan and still keep the same lender but it is also possible to refinance to a different lender entirely. While it is easy to understand refinancing on a surface level, it is important to understand the inner workings if you are considering refinancing.

Speak to Your Broker

The first step in the refinancing process is to reach out to your broker and enquire about the loan you are interested in refinancing to. Your broker will often ask a series of questions related to employment and financial situation in order to determine your suitability for particular loans.

Documentation and Paperwork

You will then be asked to send documents to confirm your identity and your financial position. It is a good idea to ensure you have these documents prepared prior to beginning your negotiation with a lender to streamline the process.

Property Valuation

Once the lender is satisfied with the paperwork you have sent through and they have confirmed you are eligible the next step is for them to value your property. This is done so that they can determine the loan to value ratio. LVR is important as it is a factor the lender will use to determine whether your loan will be approved or not.


If everything goes smoothly up until this point your new loan should be approved and your lender will transfer the property and debt to your new loan. If you are refinancing to a new lender then they will have to contact your old lender to organise the transfer. Depending on a number of factors the settlement process can take weeks and you may have to pay settlement fees.

While refinancing can be a lengthy process it is worth the time if you can save lots of money in interest and fees by refinancing, or if the new loan better suits your personal circumstances. A mortgage broker can help you streamline this process so you can spend more time enjoying your new home rather than getting bogged down with negotiation and paperwork.

If you would like to learn more about refinancing your home loan, please get in touch with us today.

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