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5 tips to reduce stress when refinancing your loan

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Do your research, be realistic, find a fast online lender and take the stress out of refinancing.

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Refinancing your home loan often takes hours of work and it's rarely a walk in the park either - particularly if you're under pressure to refinance.

Maybe you're nearing the end of your fixed rate period and your existing lender has proposed an astronomical replacement. Or maybe your financial situation has changed and you suddenly need more manageable repayments.

Whatever the reason, you'll need to find a new lender, get your paperwork together, submit an application and wait for approval. In other words, say hello to a world of stress and a few weeks of sleepless nights.

Or don't. In reality, there are ways to reduce or even eliminate the stress associated with refinancing. A well-organised borrower taking advantage of fast digital mortgages and real-time approval processing can speed up the whole thing and cut the anxiety out completely.

Here's what you need to do.

1. Check your credit score (even if you think you're fine)

Refinancers probably haven't checked their credit score in a while, but it's one of the first things your new lender will do. If you've been making repayments on your mortgage for years you probably have nothing to worry about, but sometimes things go wrong without you even realising it.

If someone has racked up big debts on your credit card, or there's an error in your credit report, catching it before you refinance will make the whole process easier.

2. Take a look at your equity position

Your equity is how much your home is worth, minus outstanding debt. To estimate your equity you just need to:

  1. Work out how much your property is currently worth. Estimate the current price you could get for your home if you sold it today.
  2. Work out how much is left to repay on your mortgage. Check your latest home loan statement.
  3. Subtract your remaining loan debt from the estimated value. This figure is your equity. For example, if you think your property is worth $700,000 now, and you have $200,000 left on your home loan, you have $500,000 in equity.

Having lots of equity makes refinancing easier. The more of the property you own, the smaller your debt and the less risk you are to a lender. And if you're refinancing to borrow a little more money, having equity is essential.

3. Work out exactly what you need from the new loan

Before you start applying for a new loan, identify what type of home loan you're looking for and what features you need.

For many borrowers, an offset account is essential, and a competitive interest rate is always important. You also need to decide whether you want a fixed interest rate or a variable interest rate.

Deciding on this in advance makes it easier to find a suitable loan and switch faster.

4. Go with a faster lender

Every lender is different and some are much faster at processing applications than others. One way to have a stress-free refinance is to look at an online lender that promises a fast home loan approval process.

Nano is a good example of such a lender. If you have all your financial details ready and meet the criteria, Nano can approve your loan in minutes rather than days or weeks.

It can do this because it has a sophisticated digital platform designed to speed up the process. Put simply, it has automated the process so you can get approvals fast.

You can even verify your identity online via your phone and by taking a photo of your ID via your phone. You don't need to provide any paperwork either so don't worry about finding all your pay slips or sorting through bank statements. Instead, you can provide you bank details securely and Nano can quickly analyse your income and spending habits.

5. Know your limits

You'll always have an easier time refinancing if you're trying to borrow within your means. This means working out your equity, how much you want to borrow and estimating your borrowing power.

If you're trying to borrow more than you can afford, your application will probably get rejected.

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