What costs does it involve when you refinance your home loan?

Refinancing could be a great way to restructure your current mortgage to help you save more money if you believe that you are paying too much interest for your existing mortgage. But refinance is more to just finding a loan with a 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 known as ‘early termination’ or ‘early discharge fees’.

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.

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 the 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. Such as your property value has dropped, or you consolidate your other liabilities into your home loan and that bring the total home loan LVR to more than 80% LVR. You might not pay the LMI on the previous loan but when you refinance if your LVR is more than 80% LVR, 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 a broker can negotiate some of the above fees, 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.

Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in this newsletter. It contains general information only and has been prepared without considering your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.