Refinancing your home loan in Australia can be a great way to save money on interest, access equity in your home, or consolidate debt. However, before you can refinance, you’ll need to meet certain eligibility criteria.
- Credit score
Your credit score is one of the most important eligibility criteria when it comes to refinancing in Australia. Your credit score is a number that represents your creditworthiness, based on factors such as your payment history, credit utilization, and length of credit history. Lenders use your credit score to determine your risk as a borrower, and a higher credit score generally means you’ll be eligible for better interest rates and loan terms.
To be eligible for refinancing in Australia, you’ll typically need a good credit score, which is generally considered to be above 700. However, some lenders may have different credit score requirements, so it’s important to check with your lender before applying.
- Equity in your home
Equity in your home is the difference between the value of your home and the amount you owe on your mortgage. To be eligible for refinancing, you’ll typically need to have a certain amount of equity in your home.
The amount of equity required can vary depending on the lender and the type of loan you’re applying for. However, as a general rule, you’ll need to have at least 20% equity in your home to be eligible for refinancing without paying lender’s mortgage insurance (LMI). If you have less than 20% equity, you may still be able to refinance, but you’ll need to pay LMI, which can be a significant additional cost.
- Income and employment
To be eligible for refinancing, you’ll also need to have a stable income and employment history. Lenders will typically require proof of your income, such as pay slips or tax returns, and may also ask for details about your employment history and stability.
Having a stable income and employment history can help you demonstrate your ability to make repayments on your new loan, and can increase your chances of being approved for refinancing.
- Loan purpose
Finally, the purpose of your loan can also impact your eligibility for refinancing in Australia. Different lenders may have different criteria for the purposes of refinancing, and some may not allow certain loan purposes.
For example, if you’re looking to refinance to access equity in your home, you may need to provide proof of the purpose of the funds, such as for home renovations or investment purposes. Some lenders may also have restrictions on refinancing for debt consolidation, so it’s important to check with your lender before applying.