What is the refinancing Fast Track process?

What is the refinancing Fast Track process?

In your refinancing research you may have come across something known as the Fast Track refinancing process or FastRefi. This refers to a specific type of refinancing, offered by some lenders, that allows the borrower to get their new loan settled in approximately three days if no physical property valuation is required.

Compared to the standard refinancing time of 21-30 days this is significantly shorter.

But what is it that makes this process so fast? And is it always a good option for all borrowers?

This article will answer commonly asked questions about the Fast Track refinancing process and what it means for you as a borrower.

What makes the Fast Track process so fast?

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The Fast Track refinancing process is able to be relatively short because a prospective lender agrees to take on your existing debt before the title of the property is transferred to them. This cuts out the time consuming back-and-forth between your old and new lender which would usually occur before settlement.

During the standard refinancing process, your new lender will wait for your old lender to transfer them the title to your property before taking on your debt. This way, your new lender has a legal right to sell your home if you cannot repay your debt. In the Fast Track process, your new lender trusts that you will not default on the loan before they have the legal means to recoup their loss.

Of course, as they are taking on a risk in this process, your new lender will ask you to pay some form of title insurance that will cover their loss if you were to default on the loan before they get their hands on the property title. Some lenders may cover this insurance fee as an incentive to convince you to switch lenders.  

Why would I prefer this to the normal process?

Borrowers who are switching to a lower interest rate will find the Fast Track option particularly attractive as it will allow them to start paying less for their loan as soon as possible. This will shorten the time it takes for them to break even on the refinancing costs and start stashing away the savings that come with a lower monthly repayment.

The faster the switch is completed; the sooner the savings will start appearing in your own pocket rather than that of your old lender.

It also means that the process will not drag on for a period of weeks or months, giving a borrower peace of mind that the switch is completed and doesn’t require following up.   

Pros
  • Process is completed faster
  • Potential savings begin sooner
Cons
  • May have to pay title insurance
  • Less time to change your mind

Will the Fast Track refinancing process cost extra?

The only reason that the Fast Track refinancing process may cost you extra is if you have to pay for the title insurance fee to cover the lender. If you will have to pay this charge, it is worth recalculating your break even point to see if getting the discounted interest rate early will pay off the extra fees you will be charged.

Who offers Fast Track refinancing?

Some lenders are known to offer the Fast Track refinancing process such as IMB and loans.com.au. If you are interested in a loan from another provider, you should contact this lender and ask if they offer the Fast Track refinancing process.

Your personal circumstances will also affect your eligibility for this process so make sure in this initial contact you are prepared to discuss your current financial situation.

Lenders that offer Fast Track refinancing

 

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If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

When should I switch home loans?

The answer to this question is dependent on your personal circumstances – there is no best time for refinancing that will apply to everyone.

If you want a lower interest rate but are happy with the other aspects of your loan it may be worth calling your lender to see if you can negotiate a better deal. If you have some equity up your sleeve – at least 20 per cent – and have done your homework to see what other lenders are offering new customers, pick up the phone to your bank and negotiate. If they aren’t prepared to offer you lower rate or fees, then you’ve already done the research, so consider switching.

How can I pay off my home loan faster?

The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.

Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

What is the amortisation period?

Popularly known as the loan term, the amortisation period is the time over which the borrower must pay back both the loan’s principal and interest. It is usually determined during the application approval process.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

Can I get a home loan if I am on an employment contract?

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.

I have a poor credit rating. Am I still able to get a mortgage?

Some lenders still allow you to apply for a home loan if you have impaired credit. However, you may pay a slightly higher interest rate and/or higher fees. This is to help offset the higher risk that you may default on your repayments.