The average time to settle a home loan refinance application is 17 days, new research from an online mortgage marketplace has revealed.
In a data snapshot of 1,021 customers, HashChing found that the average time taken to settle a home loan refinance application is 17 days, but that it can “take up to a month” for borrowers to get everything in order.
HashChing has been warning mortgage holders against waiting to refinance their home loan, stating that the proposed ‘big bank levy’ — due to come into force on 1 July — could lead to the major banks increasing their rates.
As the average time to settle a loan is now around 17 days, HashChing CEO Mandeep Sodhi argued that “borrowers who wait and see if their lender passes on the bank levy are putting themselves at risk financially”.
However, Collins Mayaki, an accredited HashChing broker, said there were three things customers should consider before refinancing a home loan, including the fact that there are several costs to consider (such as lender’s fee, exit fees, the cost of setting up the loan, duties and taxes) that could add "up to the equivalent of up to 5 per cent of the total loan amount", and warned that refinancing may not actually save the borrower money.
He said: “If you are refinancing a loan of $200,000, it can cost you anywhere between $5,000 and $10,000 to set up the new loan."
He added: "Refinancing your home loan is a good decision if the savings on your home loan make good the refinancing costs in a year or so. [For] example, a saving of $229.43 each month means it would take between 21 months and 43 months to make up the cost of refinancing the home loan.
“While the former looks like a great deal, the latter will depend on how long you intend to hold onto the property – for longer-term mortgages, it may still work out in your favour.”
Mr Mayaki also highlighted that customers go back to paying off interest, “with the initial payments more geared towards paying off the interest on your loan rather than the principle”.
He said: “It’s therefore worthwhile to check how long it will take you to pay off a new refinanced home loan compared to the existing loan.”
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