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Get your affairs in order to make the process as smooth as possible

Before making a decision to refinance, you need to thoroughly and comprehensively compare your current financial position with your position if you refinance.

Each application for a new credit product (be it a mortgage, personal loan or credit card) affects your credit rating, so you should reasonably expect you will take up the offer.

Make sure your existing mortgage is in a healthy state.

The more missed payments you have had in the last six months, the more wary lenders will be about refinancing your mortgage.

Compile a list of credit cards, persona loans and debts you have. These could all affect your capacity to borrow.

Even credit cards that have been paid off can reduce your loan amount, as the lender may consider the credit limit in its calculations.

Lenders dislike lending to people who have even small credit problems such as default on a credit card.

It is worthwhile obtaining a copy of your personal credit file to see if there are any issues that need to be resolved.

It will provide information about payment defaults or overdue accounts. You can obtain a free copy from Veda Advantage.

Ensure that all taxes and bills (utilities, mobile phones, etc.) have been paid.

If you are self-employed, tax returns and business accounts need to be up to date.

Lenders will have different documentation requirements but generally will require copies of your last two tax returns, evidence of any other income/allowances, statements of your existing bank accounts for the past six months and your accountant’s details.

Ascertain the value of your property and how much equity you have built up in it. If you find yourself owing more than the value of your property (negative equity) this will affect your capacity to refinance because lenders are reluctant to refinance a loan at 95% plus loan to value ratios (LVR).

In addition, your current lender might require you to inject capital into your loan to get the LVR ratio back to anacceptable level, which could force you to sell your home.

Once you have gathered all this information, a good place to start the process of refinancing is to sit down with a mortgage broker to discover if switching would be to your benefit in the medium to long term.

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