We’re in a competitive rates environment and one where media headlines are encouraging home loan customers to “vote with their feet” if their lender isn’t providing them with a good deal on rates.
Despite the fact many Australians know they could get a better deal on their home loan interest rate, there’s still a clear reluctance to refinance. Here are some of the key myths perpetuating this nation-wide inertia.
Myth 1: Refinancing takes a lot of time and effort
Technological advancements have done wonders to reduce the time and effort it takes to refinance your home loan. In some cases, pre-approval for refinancing can be given within one business day. At Macquarie, it’s just three easy steps and it all starts with a quick call to your lending specialist.
- Step 1: Reach out to a Macquarie banking specialist
To get the best outcome from the discussion – make sure you have the necessary details of your current loan. This includes your current loan balance, interest rate and rate type (fixed or variable), along with your remaining payment term and payment frequency.
Your banking specialist will also need a few details on your financial circumstances – to determine early on whether your loan is likely to be successfully refinanced. They’ll want to know your income, employment details, monthly expenses and any debt you hold (including credit card balances, limits and monthly repayments). If you’re unsure of your monthly expenses, our budget calculator could help.
Remember, a home loan is a lot more than a rate. Consider other loan features that might be useful to you. Some loans support offset accounts, redraw facilities and extra repayments. It’s important to understand how these features can help you reduce the amount of interest you pay over the term of your loan. Our offset calculator and repayments calculator allow you to run scenarios and if you want more information your lending specialist or mortgage broker can help.
Click here to request a call from a Macquarie banking specialist.
- Step 2: Submit your home loan application and supporting documents
Once you’ve got the conversation started, your banking specialist will work with you to package and submit your home loan application. Macquarie will need to verify your financial circumstances – so they’ll ask you to submit documents that may include:
- Your last two payslips
- PAYG summaries for the last year
- Home loan statements for the last six months of the loan you are refinancing
- If self-employed, you’ll need the last two years of tax returns and full financials for companies or trusts including your individual tax returns and notice of assessments for those corresponding years
- If it’s an investment property: most recent rental statement or your most recent year’s tax return
Don’t worry – your lending specialist will walk through the document requirements in detail with you and will ask you to upload these documents securely online, through a web and mobile based service called Ezidox.
They’ll also verify your identity at this stage. Macquarie uses a service called ZipID. ZipID arranges for an authorised representative (typically a Toll service agent) to come to your home or office at a time convenient for you to conduct an ID check.
During the application phase, Macquarie will also arrange to have your property valued. In many circumstances, a valuation can take place electronically (without the need for a valuer to visit the property in person). This is all done at no cost to you, unless the property is valued at more than $3 million.
- Step 3: Loan approval and settlement
If your loan application is approved the good news is that you’re on the home-straight. Most of your loan contracts can be signed online and we’ll make the process of discharging your current home loan painless by sending you a pre-filled discharge authority. After you sign it, Macquarie will contact your current lender to complete the process. Macquarie also takes care of conveyancing.
Once your loan has been formally approved, any accounts linked to it (such as an offset account or credit card) will be opened for you and you’ll receive a Macquarie Account ID and instructions to set up your mobile and online banking profile.
If you have the documents and information ready, an approval to refinance can be completed in as little as 5 business days from the first conversation you have with your Lending Specialist. Depending on your current lender’s discharge process, you could be enjoying the savings and benefits of your Macquarie home loan within 4 weeks.
Myth 2: Refinancing isn’t worth the trouble or expense
Some mortgage-holders might incorrectly believe that refinancing their loan won’t generate savings significant enough to offset the time, effort and expense they’ll go to – but a few simple calculations disprove this.
Our Macquarie repayments calculator shows a $450,000 principal and interest mortgage with monthly repayments, charging 5% interest, would amount to $419,651 in interest paid over a 30-year term. If we cut the interest rate by just 0.25%, to 4.75%, while keeping all other loan variables the same, interest over a 30-year term falls to $395,069 – a saving of $24,582 over the life of your loan. Take a look at Macquarie’s current interest rates here and use our refinance calculator to see how much you could save.
The benefits of refinancing can far outweigh the costs – and lenders, like Macquarie, may waive certain fees.
“For example, if you refinance with Macquarie, there’s no establishment fee and we cover the property valuation fee on properties up to $3 million,” explains Macquarie Bank home loans manager, Lucinda Schettino.
“We help our clients work out the cost savings they’ll get through refinancing – so they’re clear on how much they can save upfront,” says Schettino.
Myth 3: I don’t have enough equity in my home to refinance
Typically, you’ll need at least 20% equity in your home to refinance your loan. The more equity you have, the more your loan to value ratio (LVR) may have improved. LVR is the amount of your loan, as a percentage against the value of your property, and as it goes down your chance of a better rate goes up.
You can calculate the equity available in your home by subtracting the amount you owe on your home loan from your current estimated property value, and then dividing it by your property value. Multiply the answer by 100 to get the percentage.
In a market where house prices are falling, it’s true that you may not have as much equity in your property as you thought. This could provide you with an even greater incentive to make sure you’re not over-paying on your home loan.
“After assessing the details of your current loan and conducting a desk valuation of your property, a Macquarie banking specialist can often provide you with a clearer picture of whether you’re a candidate for refinancing - before you go to any trouble submitting your supporting documents”, says Schettino.
Myth 4: It’s too difficult to change banks
Macquarie’s offset accounts are powered by our award-winning transaction account (you can see why it’s award-winning here). So it makes sense to switch more than your home loan to Macquarie.
However, if you’ve been with your current bank for some time and have a long list of payees and billers stacked up in your online or mobile banking profile, it can seem like a lot of effort to make the switch to a new bank.
That’s not the case with Macquarie’s easy switch feature. Our mobile banking app makes it quick and easy to import payees and billers from another bank - so you can be right where you left off in seconds!