As an Australian Defence Force member, you've worked hard to secure your home. But have you considered whether your current mortgage is still working as hard for you? Refinancing might be the key to improving your financial situation, and understanding the eligibility requirements is your first step towards potentially accessing a lower interest rate and releasing equity in your property.
What Is Refinancing and Why Consider It?
Refinancing involves replacing your existing home loan with a new one, either with your current lender or a different one. For Defence Force members, this can mean:
• Accessing a lower interest rate when your fixed rate period ending
• Consolidate debts into one manageable payment
• Reduce loan repayments through extending your loan term
• Release equity to buy the next property
• Change your loan term to suit your current circumstances
Many Defence personnel find that their financial situation has improved since taking out their original loan, making them eligible for enhanced loan options.
Core Eligibility Requirements for Refinancing
Before diving into the application process, you'll need to meet several fundamental criteria:
Employment and Income Stability
Lenders want to see consistent income over at least three months, though six months is preferred. Your Defence Force employment provides excellent stability that lenders value highly. You'll need to demonstrate your current loan amount is manageable alongside your other financial commitments.
Property Valuation
Your property needs sufficient equity to make refinancing worthwhile. Most lenders require at least 20% equity, though some specialist Defence lenders offer more flexible arrangements. This equity assessment determines how much you can borrow and whether you'll need mortgage insurance.
Credit History Assessment
A solid credit history demonstrates your reliability in managing debt. Lenders will examine your credit score and any defaults or missed payments from the past few years.
Documentation You'll Need
The streamlined application process requires specific documentation:
• Recent banks statements (usually three months)
• Pay slips and employment verification
• Details of your current loan and interest rate
• Property valuation or recent sales evidence
• Identification documents
• Details of existing debts and assets
Having these documents ready can significantly speed up your application.
Special Considerations for Defence Personnel
Defence Force members often have unique circumstances that standard lenders might not fully understand. Specialist Defence lenders may offer:
• Recognition of allowances and benefits in income calculations
• Flexibility around deployment-related income variations
• Understanding of Defence career progression
• Access to exclusive Defence member benefits
It's worth checking eligibility for special lender policies designed specifically for military personnel.
Fixed vs Variable Interest Rate Options
When refinancing, you'll choose between:
Variable Interest Rate
• Rates can decrease when market conditions improve
• Usually lower initial rates
• Flexibility to make extra payments
• Rate changes affect your repayments
Fixed Interest Rate
• Certainty in repayments for the fixed period
• Protection against rate rises
• Less flexibility for extra payments
• Rates typically higher than variable
Many Defence members opt for a combination, splitting their loan between fixed and variable portions.
When Refinancing Makes Sense
Consider refinancing when:
• Your current interest rate is significantly higher than current market rates
• You need to consolidate debts
• Your financial situation has improved since your original application
• You want to release equity for investment or other purposes
• Your current lender's service isn't meeting your needs
A regular home loan health check can help identify these opportunities.
The Application Process
Refinancing typically involves:
- Assessing your current financial situation
- Researching available refinance interest rates
- Gathering required documentation
- Submitting applications to preferred lenders
- Property valuation and final approval
- Settlement and transfer to your new loan
Working with a specialist Defence mortgage broker can help you access loan options from banks and lenders across Australia, ensuring you find the most suitable product for your circumstances.
Making Your Decision
Refinancing isn't automatic - it requires careful consideration of costs versus benefits. Factor in application fees, valuation costs, and legal expenses against potential savings from reduced interest rates or improved loan features.
Remember, what worked for your financial situation when you first bought might not be optimal now. Your career progression, family changes, or investment goals might justify exploring different loan structures or lenders.
Refinancing can be a powerful tool for Defence Force members looking to optimise their mortgage arrangements. Understanding the eligibility requirements and having your documentation ready puts you in a strong position to potentially access loan options that enhance your financial position.
Call one of our team or book an appointment at a time that works for you to discuss whether refinancing could benefit your specific situation.
