Refinancing may save you money but there are costs involved, and it’s sensible to weigh up all the pros and cons, especially the costs versus the benefits, to ensure refinancing really is the right move for you. Some of the key costs you could face include:
When you refinance, your new lender may charge a range of upfront fees – the most common fees are listed below. Not all lenders charge all of these fees, and some may be negotiable.
- Loan application fee – this is usually charged when your loan settles
- Valuation fee – the lender may impose a fee to have your property professionally valued
- Settlement fee – your lender may charge a fee for the payout of your current mortgage
Lender’s Mortgage Insurance (LMI)
If your new loan is for 80% or more of your home’s value, it’s likely you’ll be asked to pay LMI – a type of insurance that protects the lender if you can’t meet your home loan repayments.
LMI involves a one-off premium, which you may be able to capitalise (add it to your loan balance) however this means paying interest on the premium, which adds to the cost.
Your current lender may charge exit fees – sometimes called ‘early repayment fees’ or ‘deferred establishment fees’.
Exit fees vary widely though they usually only apply if you have had your current loan for less than five years. As exit fees have been banned on home loans taken out after 1 July 2011 they won’t apply to your new loan. But you could still be charged an exit fee on your current loan.
If you currently have a fixed rate loan check if you could be up for ‘breaks costs’. A quick call to the lender will tell you if break costs apply – and what you’re likely to be charged.
Mortgage registration fees
When you switch from one home loan to another you may be asked to pay mortgage registration fees that let the State Titles Office know you’ve changed either your lender or the type of loan. These fees will vary according to your State or Territory.
Aussie’s Stamp Duty Calculator will show the mortgage transfer fees that apply for your area.
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