A step-by-step guide to changing banks

Are you looking to switch banks, but think it’s just too much trouble?

The good news is it’s not as difficult as you might think. Discover how you can change your bank in three easy steps and make sure you’re getting the best possible deal on your home loan.

1. Start your search

With interest rates at historic lows, there’s never been a better time to shop around for a great deal on your home loan. The good news is searching for a new bank doesn’t need to be time-consuming or difficult. To begin, make a list of the things you’re looking for in a new lender. For example:

• A better interest rate on your home loan.
• More flexible features and payment options.
• The ability to access equity and streamline your finances.
• Good customer support.

There’s never been a better time to shop around for a great deal on your home loan.

Once you’ve narrowed down the products and services you’re after, the next step is to shop various banks directly or enlist a mortgage broker to do the work for you. However, before you approach a new lender, be sure to contact your current bank and ask them if they can offer you a better deal on your existing home loan. If they agree, get their offer in writing so that you can use it as a negotiation tool with other banks.

Read more: Getting a better deal on home loans

2. Compare the costs

Because there are certain costs associated with switching lenders, you’ll want to crunch the numbers. For example, if you’re on a fixed-rate loan, will you need to pay any exit fees and early repayment penalties? What are the costs to establish your new loan? Some typical costs of switching lenders might include:

• The new loan establishment or application fee.
• Lender’s mortgage insurance (LMI) if you’re borrowing more than 80% of the loan-to-value ratio.
• Ongoing service and administrative fees.

While changing lenders will likely cost you more up front, many home owners find that they can recoup these costs in two to three years by being on a different loan product and lower interest rate.

Changing lenders can cost you more up front, but many home owners recoup these costs.

3. Apply to refinance your loan

Once you’ve made the decision to go ahead and switch banks for your home loan, you’ll need to start the application process. To make sure your application goes as smoothly as possible, make sure all your supporting documentation is available, including proof of income, tax returns, pay slips, and documentation on your existing loan and expenses.

Because applying for a new loan can seem like a daunting task, don’t feel like you need to do it on your own. Many banks can provide you with your own personal relationship manager – a home-loan expert who can walk you through the entire application and settlement process, including paying off your old loan once your new finance is approved.

Read more: Home loans from Heritage Bank

Whether you’re looking for a lower interest rate, greater payment flexibility, or to consolidate your finances, switching banks can help you achieve your goal. As everyone has different needs, be sure to consult with your financial adviser to determine if changing lenders is the right option for you.