Refinancing Paperwork: What Not to Leave Until Last

Incomplete paperwork can slow a refinance. Gathering your documents before you apply gives the lender what it needs from the start.

This guide is for Tasmanian Government employees who are weighing up a switch and want to know what to have ready. A lender has to make reasonable inquiries about your needs and financial situation, and take reasonable steps to verify it. The documents below are how that verification happens.

What Documents Do You Need to Refinance a Home Loan?

You need proof of who you are, proof of what you earn and owe, and the details of the loan you are leaving. Each lender sets its own list, so confirm the exact requirements with your broker before you lodge.

In practice, your recent payslips and employment details show your income. Your credit card statements, personal loans and any buy-now-pay-later accounts show your commitments. Your current loan contract and a recent statement show your balance, interest rate and fees. Some lenders may also ask for property documents such as a rates notice or insurance details, and your broker will confirm the list. Having everything in one folder before you start the refinance application keeps the process moving.

Before you commit to a switch, a home loan health check can show whether the numbers justify the effort. You can also read how we approach home loan refinancing for public servants.

Loan Statements and Repayment History: Why Twelve Months Matters

A lender looking at a like-for-like refinance will pay close attention to your repayment history on the existing loan. ASIC guidance says a refinance to a lower rate, with no extra borrowing, is likely to be suitable where repayments have been made when due and your circumstances have not worsened. ASIC also notes that repayments can hide financial stress, so the history it considers should cover a long enough period, for example 12 months.

That means a full year of statements is worth having to hand, not just the latest one. If you have a missed or late repayment in that window, tell your broker early so it can be explained rather than discovered.

As an example, consider a Tasmanian Government employee whose fixed rate is about to end. They have a loan of around $500,000 and want to move lenders. At the illustrative rate of 6.75% p.a., interest on $500,000 is roughly $33,750 a year. A delay costs you the rate difference, or any higher rate you stay on, for each extra week. Before applying, they download 12 months of statements, locate the original loan contract, and gather payslips and credit card statements. They also note that their offset account balance sits with the old lender. The application goes in complete, and the assessor has what is needed to verify income, debts and repayment conduct without asking for extra items. Whether the switch is worthwhile still depends on the rate and fees you are offered, and the saving is not certain.

Fixed Rate Expiry: Paperwork to Sort Before the Date Arrives

Start gathering documents well before your fixed term ends, because a break fee only applies if you leave a fixed loan before the term is up, and it is not charged on variable loans. Check your contract for the exact end date and for any fee wording.

If you are coming off a fixed rate, ask your current lender for a payout figure and a discharge authority form. Lenders require that form when you move to a new lender. Keep the new lender's settlement date in mind so the two loans line up. If you also use an offset account or redraw facility, check what balance you will carry across and what features the new loan offers. Our page on getting a lower interest rate covers what to ask your current lender before you decide to leave.

Refinancing Costs to Confirm Before You Sign

The main costs to confirm are a discharge fee on closing your old loan, an application fee on the new one, and a break fee if you are leaving a fixed rate early. ASIC's Moneysmart site also lists a switching fee if you refinance within the same lender.

Exit fees on residential loans signed on or after 1 July 2011 are generally prohibited, but break fees and discharge fees are not. If your equity is under 20 per cent, lenders mortgage insurance may also apply and can raise the cost of switching. Amounts vary by lender, so ask for them in writing. Broker fees count too, and a broker has to recommend a switch only where it is in your interests. ASIC guidance says the saving should outweigh any lost features once all costs are counted.

Investment Loan Refinance: Records That Protect Your Deductions

If the loan funds a rental property, keep every document showing what each part of the borrowing paid for. The ATO says interest is deductible based on how the money was used, not on what property secures the loan.

As an example, consider an investor with a $400,000 rental loan who refinances and adds $20,000 for a personal purchase. Total borrowings are now $420,000. At the illustrative rate of 6.75% p.a., yearly interest is about $28,350. Using the ATO's apportionment approach, the rental share is 400,000 divided by 420,000, so about $27,000 of that interest relates to the rental property. The remaining $1,350 is private. That ratio then applies for the life of the loan, and principal repayments are split in the same way.

The investor keeps the new loan contract, the settlement statement and a note of what the extra $20,000 was used for. A mix-up here can affect their tax return, so they take the figures to their accountant. Any tax statement in this article is general, so speak with your accountant about your own position. Borrowing costs such as broker fees and valuation fees may be deductible over time for the rental part of the loan, and your accountant can confirm how. For more on this, see our page on investment loan refinancing for public servants.

If your plan involves releasing equity or adding to your debt, tell your broker at the start. Extra borrowing changes how a lender assesses the application, and it changes your records too. Our home loans for Tasmanian Government employees page explains how we work with public sector borrowers.

Call one of our team or book an appointment at a time that works for you, and we will go through your documents before you lodge anything.

Frequently Asked Questions