Refinance home loan | How to Refinance Mortgage NZ | NZHL (2024)

FAQs

Is it hard to get approved for a refinance? ›

To be approved for a conventional mortgage, you typically need a minimum 620 credit score. If your score is below the mid-600s, however, you may have a harder time qualifying for a refinance. Your credit score can change over time.

Many lenders cap cash-out refinancing at 80 percent of the home's total value on most loan types. Ideally, you'll also get a lower rate in the process.

Step 1: Set a clear financial goal

There should be a good reason why you're refinancing a mortgage, whether it's to reduce your monthly payment, shorten your loan term or pull out equity for home repairs or debt repayment.

There's no exact time limit on how long a refinance can take. However, most refinances close within 30 to 45 days of applying for the refinance loan. While lots of refinancing tips can help the refinance process go smoothly, you can take a few steps on your own to speed up the process.

Your lender may disqualify you from refinancing your mortgage if you carry too much debt. Your debt-to-income ratio must meet your lender's thresholds for you to qualify. Having a low credit score may also prevent mortgage lenders from approving your application.

An Adequate Credit Score

Lenders look at your score to determine how likely you are to repay your debts. Your current credit score also determines whether you're eligible for a refinance and the mortgage rate you can get. Just like with your original mortgage, the higher your credit score, the better your rate.

One of the best and most common reasons to refinance is to lower your loan's interest rate. Historically, the rule of thumb has been that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

The cost to refinance a mortgage ranges from 2% to 6% of your loan amount, and you can expect to pay less to close on a refinance than on a comparable purchase loan. The exact amount you'll have to pay depends on several factors, including: Your loan size. Your lender.

What happens at a refinance closing? ›

You'll be asked to review and sign several documents, including affidavits and declarations. Be sure to read all documents carefully and understand their purpose as they are legally binding. When everything is signed and completed, you'll leave the office with a new loan, including a new rate and term.

To qualify for a refinance, take a look at your debt-to-income ratio. The new monthly mortgage payment shouldn't be more than 30% of your monthly income. To refinance $400K over a 30-year fixed term with an interest rate of 3.5%, you'll need an income of approx. $6000/month.

If you bought a heavily used car or have racked up lots of miles and want to refinance the loan, you may not be able to. Lenders tend to have a cap of 100,000 to 150,000 miles. You may not qualify with an older car, even with fewer miles. Typically, lenders set a hard limit at 10 years old.

Refinancing is generally easier than securing a loan as a first-time buyer because you already own the property. If you have owned your property or house for a long time and built up significant equity, refinancing will be even easier.