You may have heard that pre-approval is the first step you should take when searching for a new home or investment property. But the question we often receive is, “why?” What is it about pre-approval that’s so important?
First of all, what is pre-approval? Basically, it’s when a lender gives you conditional approval for a home loan up to a set amount. The final approval will still depend on the property you plan to purchase (and any other stipulations from the lender) but, pre-approval helps you accurately determine how much you can borrow based on your current financial situation. Once you have pre-approval, it’s generally valid for 3 months, giving you plenty of time to go house hunting with a fixed budget in mind.
By obtaining home loan pre-approval at the very beginning, you’ll be able to save yourself time and hassle by focusing on properties that are within your approved price range. Pre-approval will also give you more certainty once you’re ready to make an offer and will help you be viewed as a serious buyer by real estate agents.
With pre-approval, you’ll:
- Have the confidence to make a serious offer
- Know exactly how much you can afford to spend
- Maintain bargaining power when negotiating on price
- Obtain formal approval from the lender much faster once your offer is accepted
As part of the pre-approval process, your chosen lender will look at your overall profile to determine whether or not they’re likely to lend money to you. They’ll look at your assets and liabilities, deposit, age, income, credit score and a whole range of other details in order to assess your profile. Based on this assessment, they’ll then indicate whether they are likely to lend to you and how much they would allow you to borrow.
Keep in mind that a pre-approval is not a guarantee of formal approval. So, when you find a house and make an offer, it’s important to make the contract “subject to finance”. This gives the lender time to complete a more in-depth assessment and determine if the security is acceptable to the bank (in other words, are you paying more than the property is worth). In deciding whether or not to extend you a loan for a specific property, the lender will usually arrange for an official property valuation to be completed.
When making an offer on a property, it’s also wise to include other conditions, such as making the contract subject to a building and pest inspection. That way, if the property has any serious pest problems or construction defects, you’ll have the option to rescind or renegotiate your original offer. When determining what conditions to include, it is always best to consult with an experienced property conveyancer.
To organise pre-approval, call one of our Finance Specialists on Ph: 1300 1 BORRO or fill out a Contact Form on our website today.
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Whether you’re a…
- Homeowner who wants to refinance to a more competitive interest rate
- Home upgrader seeking finance solutions for a second home purchase
- Aspiring business owner seeking start-up capital
- Owner of an established business looking for finance or cash flow options
- First home buyer looking for an affordable home loan
Borro can provide the tools, services and support that you need to achieve your financial goals.
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At Borro, we have a number of buying and selling house calculators that can give you estimates of how much you can borrow, how much you’ll need for a deposit, and comparisons between loans.
We compare all loans across a large panel of 50+ lenders to find the right solution for you. Our Finance specialists are experienced in all types of loans, ranging from home loans to personal loans through to asset and commercial loans, offering you a comprehensive range of options to help you borrow money.
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Frequently Asked Questions For Refinancing Your Home Loan
At Borro we understand that homeowners choose to refinance their mortgage for different reasons. It might be to consolidate debt, purchase an investment property, renovate your existing home, or maybe you are simply looking for a lower interest rate. No matter the reason we can help you grow a healthier financial future by refinancing home loan.
The ACCC Home Loan Price Inquiry report recommended that lenders prompt borrowers to consider refinancing every 3 years. However, we believe that a reassessment should be carried out once a year for maximum benefit. This doesn’t mean that you need to do a complete refinance every 12 months. But a reassessment completed by an experienced mortgage broker will tell you if your home loan is still offering a competitive interest rate or whether you would be better off refinancing. Additionally, it’s important to do a home loan reassessment whenever you’re approaching the end of a fixed interest rate period. This is because most lenders will automatically roll a home loan over to their standard variable rate once the fixed rate term has concluded (which may be significantly higher than your current low fixed rate).
Many homeowners are wondering if now is a good time to refinance home loans in Australia. For most, the answer will be “yes” if you’ve had your current home loan for 2 years or more. The official RBA cash rate has been sitting at just 0.10% for over 7 months, which has resulted in lenders dropping their interest rates to remain competitive. How far have rates dropped? Well, the average variable home loan rate in Australia is now 106 basis points lower than it was in June 2019. While most interest rates in 2018/2019 began with a 4, many fixed interest rates now start with a 2, and some lenders are offering interest rates as low as 1.99%!
Meanwhile, property prices in South-East Queensland have been steadily rising as interstate migration increases demand in the local property market. This means that many homeowners will now have more equity, which puts them in a stronger refinancing position.
If you’re considering refinancing your home loan, start by talking to a mortgage broker at Borro. That will allow you to explain what you hope to achieve from your refinance and get expert answers to any questions that you may have. We can then assess your current home loan and compare it with a wide range of mortgage products from a diverse panel of lenders. Once we’ve identified which home loan product will present you with the best possible results, we can then get started on your refinance application.
The process of refinancing is similar to what you would have experienced when you applied for your original home loan. The new lender will want to see evidence of your current income and living expenses, as well as recent statements from your current mortgage lender. They’ll also arrange for an evaluation of your property to determine how much equity you currently have. The good thing about refinancing is that borrowers are often in a stronger financial position than when they were first home buyers. And the stronger your financial position, the easier it is for us to negotiate better loan terms.
Once the refinance home loan has been approved, the new lender will arrange for your existing home loan to be repaid in full. You’ll then start making repayments to the new lender.
The length of time it takes to process a home loan refinance will vary depending on a range of variables, including which lender you’ve chosen and how complex your application is. Typically, to refinance a home loan in QLD will take around 4-6 weeks from start to finish. However, thanks to the ongoing ramifications of COVID (and the surge in refinance applications), most refinance applications are currently taking slightly longer to finalise (averaging around 6-8 weeks).
Some borrowers hold off on refinancing because they’re happy with their current lender and don’t like the idea of having to switch. The good news is refinancing doesn’t necessarily mean changing lenders. We can approach your current lender about refinancing your existing home loan to a product with a more competitive interest rate or with more suitable loan features. Many lenders will readily allow existing customers to refinance because it’s more economical for them to lower your rate than lose your business altogether.
Many lenders are currently offering refinance cashback deals of up to $3,000 to refinancing homeowners. For some borrowers, this will not only cover the costs associated with refinancing but also leave them with a bit of leftover cash. However, before refinancing for a cashback deal, it’s important to assess whether the loan product on offer is right for you. There’s not much point in refinancing if the loan isn’t competitive or won’t support your long term financial goals. To ensure a cashback refinance deal will be beneficial, talk to one of the experienced brokers at Borro.
According to a 2020 study by CoreData, almost 1 in 2 homeowners don’t think banks are acting in their best interests. Additionally, over half of those surveyed were sceptical about whether a bank would provide them with unbiased financial advice. Considering this is how so many homeowners feel, it’s easy to see why some may be hesitant to refinance.
Fortunately, the mortgage brokers at Borro can help. Our brokers are governed by legislation known as ‘Best Interests Duty’, which means that we are legally required to always act in the best interests of our customers. We can provide you with expert advice that is totally unbiased and tailored to suit your current financial situation. So, when you work with a broker from Borro, you can trust that you’re getting the best refinance deal to suit your needs.
The experienced team of mortgage brokers at Borro can help you successfully restructure your finances, ensuring that when you refinance, you’ll always come out in front and achieve great savings. If you’re ready to start the process of finding a better deal, then contact us today on Ph: 1300 1 BORRO or email: email@example.com.
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