How long does refinancing a home loan take?

Why a refinance is harder to time than a purchase

A purchase has a settlement date written into a contract, and every party to it is bound to that date. Solicitors, agents, lenders and settlement agents all work backwards from one deadline that somebody else set.

A refinance has no contract and no deadline. Nothing obliges anybody to hurry, which means the file moves at the speed of whichever party is slowest, and there is no external pressure correcting that.

So the range is genuinely wide, and it is wide for reasons sitting in your own file rather than in the process. No turnaround time appears anywhere on this site, and that is deliberate. Not one of them is verified, and a timeframe put in writing by a credit licensee is something that licensee has to answer for.

Two lenders, and only one of them wants this to happen

A purchase involves one lender. A refinance involves two, and their interests point in opposite directions.

The incoming lender is winning a loan and has every reason to move on it. The outgoing lender is losing one, and its discharge team is not measured on how quickly it lets you go.

That is not an accusation, it is just how the incentives sit. It matters because a good deal of the elapsed time in a refinance belongs to the side that gains nothing from finishing.

• How quickly your outgoing lender processes the discharge authority once it has been signed and returned
• The payout figure, which is quoted to a particular date and has to be reissued if settlement moves past it
• Whether its retention team rings you first with an offer to stay, which is common and which nothing else waits on
• How promptly it releases its mortgage over the title once settlement is booked
• Which settlement dates its own team is prepared to accept
• Its own internal queue, which moves with its volumes and which no broker can jump

None of that is something anybody acting for you could accelerate directly. What a broker could do is start it at the right moment, submit it in the form that lender accepts, and keep asking.

The stages a refinance goes through

Very little of this is explained anywhere, which is why the wait feels longer than it is. Naming the stages at least tells you what the silence is made of.

1. 1

   Your current loan is reviewed and the market compared

   Rate, structure, fees, features and what is left to run, measured against the lenders whose policy fits your position. Nothing has been lodged anywhere yet and nothing has touched your credit file.

2. 2

   The application goes to the incoming lender

   This is a full credit application, not an administrative transfer. Your income, commitments and living costs are assessed against that lender's current policy and your position today, rather than the one you had when you first borrowed.

3. 3

   The property is valued

   The incoming lender orders and accepts its own valuation, and that valuation belongs to it rather than to you. A figure below what you expected could change how much it is prepared to advance and send the file back a stage.

4. 4

   Formal approval and loan documents are issued

   The lender commits to the loan and sends documents to sign. Every borrower has to sign, and certified identification is commonly required at this point.

5. 5

   The discharge authority goes to your outgoing lender

   This is the step most people do not know exists. It is your form to sign rather than your broker's, and until it lands and is accepted, nothing at all has begun on the outgoing side.

6. 6

   The title and the registered interests are checked

   Names, ownership and anything registered against the property are read properly, often for the first time since you bought. What surfaces here is covered further down.

7. 7

   Settlement is booked between the two lenders

   Both settlement teams have to agree a date, so it is booked rather than chosen. The payout figure from your outgoing lender is quoted to that date.

8. 8

   The new loan starts

   The old mortgage is discharged, the new one is registered, and the accounts, offset arrangement and direct debits are set up. Your first repayment amount and date come from the new lender.

Read down that list and notice where the file leaves the hands of anybody you are paying. Two of the eight stages are entirely the outgoing lender's, and one is the titles office.

What to have ready before it starts

Most of the elapsed time in a refinance is not work being done. It is round trips — somebody asks you for a document, you go and find it, it goes back, and two or three days have gone. Assembling the material before anybody asks for it is the one lever a borrower actually holds.

A refinance is a full credit application assessed against your position now, not the one you had when you first borrowed. The incoming lender wants the evidence a new borrower would produce, and it wants it current.

• Identification for every borrower, in the form that lender accepts and certified where it asks for certification
• Income evidence — recent payslips for salaried income, or tax returns, financial statements and your position with the ATO if you are self-employed
• Recent statements for the home loan you are leaving, showing the balance, the repayment history and any offset or redraw balance
• Statements and current limits for every other loan, card and buy now pay later account, including the ones you never use
• An honest account of your living expenses, because the lender assesses what your household actually spends rather than what you intend to spend
• The discharge form your outgoing lender uses, requested from that lender rather than downloaded from somewhere generic

None of that shortens a lender's queue, and nothing does. What it removes is the waiting that sits between the queue and you, which is the part anybody could do something about.

The discharge authority, and why it is the usual hold-up

The discharge authority is the form that instructs your existing lender to release its mortgage. It goes to that lender, not to the new one, and you sign it yourself rather than somebody signing it for you.

People commonly assume that approval from the new lender set everything in motion. It did not. Until the discharge authority is signed, returned and accepted, the outgoing half of your refinance has not started.

It is also the single easiest thing in the process to get wrong, and a form sent back for a correction goes to the end of somebody's queue rather than the front of it.

• Every borrower on the existing loan signing, including one who no longer lives at the property
• Names signed exactly as the lender holds them, including a former name that was never updated
• That lender's own current form, obtained from them rather than a generic one found online
• Identification in the form that lender asks for, certified where it requires certification
• Every facility being discharged listed, including a split, a line of credit or a second account you had forgotten
• An answer ready for the retention call, so it is a conversation rather than a stall

What surfaces when the title is read

The property does not change hands in a refinance, but the title is still examined properly. Things that were never a problem while the loan sat where it was become a problem the moment one mortgage has to replace another.

• Names on the title that no longer match the names on the new application, after a marriage, a separation or a death
• A second mortgage, a caveat or another registered interest that has to be dealt with before the new lender takes its position
• A co-owner who is not part of the refinance and whose consent is needed
• The property held in a trust or a company name, which changes what the incoming lender needs to see
• Building work, a subdivision or a strata change that was never reflected in the title particulars
• A lot description or address that reads differently on the title than it does on your own paperwork

None of those are quick to resolve once settlement is being booked, and several need a settlement agent or a solicitor rather than a lender. They are also invisible until somebody looks, which is why they turn up late so often.

Settlement, and the changeover afterwards

Settlement is where the incoming lender pays out the outgoing one, the old mortgage is discharged and the new one is registered. Both lenders' settlement teams have to agree the date between them, which is why it is booked rather than picked.

If it moves, it usually moves for a reason on one side or the other, and the payout figure quoted to the original date has to be reissued. That is ordinary housekeeping rather than a sign something has gone wrong.

• Keep paying your existing loan exactly as normal until settlement is confirmed
• Do not cancel the direct debit on the old loan yourself, however close the switch looks
• Expect that interest could be charged on both loans across the changeover, which is usual rather than an error
• Leave any offset or redraw balance where it is until you are told the account is closing
• Move your salary and your other direct debits only once the new accounts are open and confirmed
• Check the first repayment amount and date on the new loan against what you agreed to

Most of that changeover admin is small. The one that causes real damage is cancelling the old direct debit early, because a missed repayment on a loan that has not settled yet could be recorded on your credit file.