Though there is no legal limit as to how often you should refinance a property, it is best to do it every 2 to 5 years, or whenever your initial fixed rate term expires. However, if you refinance a property frequently it can become costly, so it is only wise to do it if the interest savings outweigh the closing cost.
The refinancing of a property is also known as “Remortgaging a Property”, and the process usually takes 4 to 8 weeks to fully complete. There are a few reasons as to why someone would choose to refinance a property, such as;
- To secure lower interest rates.
- To release equity for home improvements.
- To switch between fixed and variable rates.
The Process
To successfully refinance a property, it is best to start by assessing your current mortgage terms, calculating any potential savings and to apply for a new loan to replace your existing mortgage. There are some standard steps to follow to help a refinance process go smoothly which are;
- Evaluate Your Current Deal – It is important to determine what period of your current deal you are in, as leaving too early can concur an Early Repayment Charge (ERC).
- Decide Your Goal – Are you refinancing to try to get a better rate? Or are you wanting to do a “Cash Out” refinance to borrow against a property’s equity to free up capital?
- Compare The Market – Don’t just jump into a deal. Shop around with the help of whole-of-market mortgage brokers. Using one of these can not only save you time, but also provide access to exclusive products which can help you through the refinancing process that you may not have had access to if you went to the high street or the bank.
- Prepare Your Documents – Gather together your documents, you will need: recent payslips, proof of income, proof of ID, tax returns, bank statements, and details of your current mortgage balance.
- Apply and Value – Once you have found a deal that suits you, submit your application. Your new lender will then conduct an appraisal (also known as a valuation) of your property to ensure it meets their lending criteria.
- Conveyancing and Completion – A legal representative (conveyancer), will handle the transferring of funds once a new mortgage offer is approved. They will also pay off the old mortgage and register the new charge.
Key Costs To Remember
Before you go ahead with any of the above steps, remember to weigh the costs of the process against your long term savings, to ensure it is worth going ahead with the refinancing. The costs of the process are;
- ERC (Early Repayment Charges) – This is usually 1%-5% of your outstanding balance that you will have to pay if you decide to leave your current deal before it has finished.
- Arrangement Fees – These are the admin fees that your new lender charges for setting up the new mortgage.
- Valuation and Conveyancing Fees – These are the legal fees that are charged by your legal representative for appraising/valuating your property and completing the legal paperwork.
