Following the lodgement of a home loan application, hopeful borrowers are often keen to know what will happen next and how long it will take for them to receive the verdict.
The bad news is that there is no one-size-fits-all answer.
The good news, however, is that a solid application is the key to keeping the approval time short.
The amount of time it takes for you to receive a response to your home loan application can vary. An answer is usually received between two days to two weeks, depending on a range of factors.
“For a reasonably straightforward application, it’s 48 hours to a final approval. But, depending on how complex the circumstances are, it can take longer than that,” explains the finance broker.
Before offering conditional approval, your potential lender will need to make an assessment of your application and conduct a valuation of the property. Of course, having a valuation that is acceptable to the lender done in advance will expedite the process.
“With valuations, the intention is to support an application rather than to make or break it,” the broker says. “There are a few things that can result in an application not being approved based on valuation, like zoning, property size, or if the condition of the property is poor enough that major repairs would be required before it could realise its market value.”
The lender will also assess your capacity to repay the loan amount you have requested. This is where all of the information about your salary and liabilities come into consideration, and where accurate and complete information is essential.
“The credit review by the lender can include a bit of to-and-fro between the customer, the broker and the lender due to the lender’s request for further information as that credit review takes place,” the broker says.
Your potential lender makes an overall judgement of you as a borrower and the complexity of your financial history will affect how long this takes.
“It’s best to be full and frank in disclosure from a borrower’s perspective. The biggest red flag is non-disclosure of liabilities or adverse information on a credit history, whether it is included in documentation or not,” the broker says.
“The complexity of the application process is a great reason why you would sit down with a reputable broker, as they can just explain all of that to you.”
Following the submission of an application, you can expect your finance broker to be in touch with you to update you on progress, and to notify you of the outcome. If your application is approved, your broker will also advise you of when to expect a formal letter of approval from your lender.
Speak to our lending team about how they can simplify the home loan application and approval process, and create the strongest application for you.
When Would I Refinance My Mortgage?
Whenever it makes financial sense to do so.
Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.
Mortgage refinancing reasons: lower rate
The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.
Mortgage refinancing reasons: more flexibility
Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.
Mortgage refinancing reasons: renovation
If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.
Mortgage refinancing reasons: home equity
Over recent years in the property market houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.
Mortgage refinancing reasons: defaulting
Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to your MFAA member about refinancing your home loan to make it more manageable.