As interest rates and personal situations change, many property owners find themselves thinking about whether their current mortgage structure best suits their needs. Refinancing is a great way to reduce lending over time, obtain incentives from the banks, for example, a cash contribution offer, or access additional funds if required.
What is a refinance?
Refinancing is the process of discharging your existing lending with one bank and entering into new lending with a new bank. The new loan is used to repay your existing mortgage, and the balance if any comes back to you.
The first step in the refinancing process is to speak with your bank or engage a mortgage adviser. They can assess your financial position; compare lending options to ensure you get the best option for you and determine whether refinancing is likely to be of any benefit. Once your new mortgage is approved, the bank will issue loan documents to your solicitor who will then complete the next part of the process for you.
Once the bank issue loan documents to your solicitor, they will prepare everything to complete your refinance. Whenever a mortgage is registered or discharged from a title, it is your solicitor’s job to ensure that the existing mortgage is discharged, the new mortgage is correctly registered, and all legal requirements are complied with. Your solicitor will also explain the documents to you and answer any questions you may have.
A typical refinance process is as follows:
- We receive instructions or loan documents to complete your refinance
- We write to your current bank to discharge your mortgage advising them of the settlement date
- We meet with you to sign all documents and send them back to the bank
- On settlement day once we have your approval of the repayment figures, we receive the money in from your new bank, repay your current mortgage and put the balance back into your account (if any)
Benefits of refinancing
One of the most common reasons property owners decide to refinance their property is to obtain a better/lower interest rate. While sometimes small, these reductions can significantly reduce the loan term payments over time.
A second reason people refinance is to obtain a cash contribution offer. A cash contribution is essentially a gift from the bank to say thank you for having your mortgage with them. There are always terms and conditions though and generally one of these are to stay with the bank for at least 3 or 4 years. If you leave within that timeframe, a percentage of this will need to be repaid on settlement.
A third reason people refinance is to access additional funds from the bank. Sometimes people want to borrow extra funds for a variety of reasons, including but not limited to completing renovations, consolidating existing debt or purchasing anew property.
Refinancing can have many benefits including those listed above and your mortgage adviser will be able to expand on the benefits of these for you.
Conclusion
Refinancing your property is a straightforward process and by working with your bank or mortgage adviser and engaging an experienced property lawyer, you can ensure the process is completed quickly and efficiently. If you are considering refinancing your property, please feel free to reach out to the team at Absolut Legal, we would be more than happy to help you with this.
