The gain from reduced interest rates should be higher than the home loan refinance cost if you’re planning to refinance your home loan.
The ultimate goal is to be better off with new home loan products, rates, and lower home loan refinance costs.
Nevertheless, you cannot ignore the possibility of incurring home loan refinance costs. It may outweigh its benefits, irrespective of how attractive the interest rate is.
So, before refinancing, make sure that you know the numbers. Mostly, how much does it cost to refinance your home loan? The home loan refinance cost comprises the following fees:
Settlement fee mortgage registration
Exit fees are sometimes referred to as termination or repayment fees.
It may vary widely and only applies to loans of less than five years. However, after 1 July 2011, exit fees became illegal. So it won’t apply to the new loans, but it may apply to your existing loan.
Mortgage discharge fee
The mortgage discharge fee compensates the lender for the loss of revenue resulting from early loan termination or loan switching.
Application or establishment fee valuation
The lender may charge a loan set-up or an upfront fee to cover the necessary document costs. It’s usually payable on most of the new loans.
Lender Mortgage Insurance (LMI)
If your loan LVR exceeds 80%, in most cases, the lender may require protection to cover the additional exposure or risk of non-repayments.
LMI is an additional cost on top of the loan, as you are paying interest on LMI’s premium.
Related Topic: How to Avoid or Reduce LMI for your home loan or mortgage
Stamp Duty and other government charges
If you increase the loan while refinancing, then stamp duty will be payable on the increased portion of the loan, and it varies across States. Check with your mortgage broker for appropriate advice.
Break fee
The lender may likely charge a fee if you break a fixed-term contract. The fee varies depending on the loan amount, prevailing interest rate, duration of the loan and the fixed term interest rate, etc.
Monthly account fee
Before taking out your new loan, it’s better to check with your lender that you will be paying an account-keeping fee on a monthly basis, which will increase the burden on your overall costs.
Establishment fee property valuation
The new lender requires assessing the current market value of the property in order to determine the LVR for refinancing. This may additionally cost you around $150 to $300. However, some lenders have a provision to waive this cost. Ask your mortgage broker for help.
A mortgage broker may be a great help in negotiating with the lender for some of the above fees on your behalf. Also, it helps you identify and minimise some of the home loan refinance costs.
We suggest checking and calculating in terms of dollar values whether refinancing will make you better off in achieving your wealth goals.
If you are unsure about benefits and Home loan Refinance Cost, then it’s worth talking to our expert team at Finmortg brokers. Contact us for quick help.
