When refinancing a property between banks people often think it is just a simple process of signing up a new loan with your new lender and paying back the old bank. While essentially this is a good description of how the financial side of the transaction works, there are also other things to consider. These include:
Discharge: The mortgage that your current bank has over your property needs to be discharged at the time of you taking out the new loan with the new bank. With this discharge process you need to be aware of a few things:
- Is there sufficient new borrowing to cover off the old bank’s debt?
- Are there any break-costs you will incur with your old bank, if there are fixed rate loans that are still in the middle of the fixed rate period
- Has the old bank been given sufficient notice to organise the discharge to avoid you being charged an urgent discharge fee on top of the standard fee the old bank will charge?
Bank Contribution: Your new bank should be willing to provide you with assistance in making the move, given they are obtaining a new customer. Such assistance can include contributions to costs, coverage of break-costs with your current bank and/or a cash contribution. Make sure you ask what is on offer and compare it against what other banks may be willing to give you to switch to them.
Structure: The point in time you are doing a refinance you are effectively doing a mini-conveyance with the discharge of the old bank’s mortgage and a registration of the new mortgage. If you have considered changing the ownership structure of your property, especially if the refinance relates to a rental property, then the time the refinance occurs is also the best time to do the change of ownership to reduce your costs. Please contact us if you are considering a restructure, as there may be adverse income tax, GST or financial consequences in doing so. Even better, there may be major advantages to be taken in structuring things right, so make sure you contact us to discuss these possibilities.
Timing: The process of doing a refinance does take a reasonable level of thought to make sure everything is appropriately covered. Make sure you give yourself enough time to think through all the issues and make sure the refinancing is done in a systematic and orderly fashion to make sure you are properly covered in all respects. We have seen people jumping the gun too quickly, not realising they have large break-costs in moving banks that they had failed to take into account. We can help prevent those types of scenarios happening for you by making the process an orderly one.