What costs does it involve when refinancing?

Refinancing could be a great way to restructure your current mortgage to help you save more money if you believed that you are paying too much interest for your existing mortgage, but refinance is more to just finding a loan with lower interest rate and making the change. Before making any switch, ensure that the savings that you could make outweigh the fees involved. The followings are a few different exit costs that you might consider:

Exit Fee Although loans that were taken out after 1st July 2011 are not subject to exit fees, those taken out before 1st July 2011 may still subject to the exit fees. It also knows as ‘early termination’ or ‘early discharge fees,’ they sometimes are paid by your new lender but are generally applied to an early contract exit.

Establishment fee Establishment fee also knows as an application or setup fees. These cover the lenders cost to preparing the necessary documents for your new home loan. They are payable on most new loans, and the alternative to not paying this particular fee is being charged higher ongoing fees for the life of the loan.

Mortgage discharge fee Mortgage discharge fee is covering your early legal release from all mortgage obligations. Please do not confuse the mortgage discharge fee with exit fee. Mortgage discharge fee is also known as ‘settlement’ or ‘termination fee.’ Its purpose is to compensate your lender for the revenue it may lose due to the contract break.

Lender Mortgage Insurance Lender’s mortgage insurance (LMI) is a non-transferrable premium. If at the time of your refinance, if you refinance your current mortgage more than 80% LVR (Loan to Value Ratio), then you are subject to LMI fee even if you paid it on the original loan application. Sometimes extra care is also needed because whether you are holding 20% equity of the initial valuation of the property if your property’s value has decreased and while LMI may not subject in the original loan, it may be payable on the refinance.

Other government charges Fees are applied for the registration and deregistration of a mortgage so that any future buyers can check all claims on a property. Varying from state to state, these can sometimes add up to $1000 or more.

Break Fee If you were on a fixed rate loan, your lender is likely to charge you a fee for ‘breaking’ out of the fixed term loan. This fee varies depending on the amount owed and the interest rate you were locked into, the current interest rate and the duration of your loan.

Although some of the above fees can be negotiated by a broker, the total cost can be substantial. Please come to speak to Kevin Poh on 0415820016 to ensure that refinancing will help you achieve your goals while maintaining your capacity to service the debt. Kevin also ensure you are only paying the relevant fees for your unique circumstances.