The gain from reduced interest rate 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 a new home loan products, rates and lower home loan refinance cost.
Nevertheless, you cannot ignore the possibility of incurring home loan refinance cost. It may outweigh its benefits irrespective of how attractive is the interest rate.
So, before refinancing make sure that you know the numbers. Mostly home loan refinance cost comprises of the following fees:
Exit fee
Exit fees are sometimes referred as termination or re-payment fees.
It may vary widely and only applies the size and duration if less than five year loan. However, after 1 July 2011 exit fees became illegal. So it won’t apply to the new loans but may apply to your existing loan.
Mortgage discharge fee
Mortgage discharge fee compensates lender for loss of revenue due to early loan termination or switching.
Establishment fee
The lender may charge loan set up or upfront fee to cover the necessary documents costs. It’s usually payable on most of the new loans.
Lender Mortgage Insurance (LMI)
If your loan LVR exceeds like in most cases greater than 80% then the lender may require protection to cover that 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 increase 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 on loan amount, prevailing interest rate, duration of the loan and the fixed term interest rate etc.
Monthly account fee
Before taking your new loan it’s better to check with your lender that you will be paying account keeping fee on monthly basis will increase burden to your overall costs.
Valuation Fee
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 provision to waive this cost. Ask your mortgage broker for help.
A mortgage broker may be a great help to negotiate with the lender for some of the above fees on your behalf. Also, help you to identify and possibility to minimise some of the home loan refinance cost.
We suggest to check and calculate in terms of dollar values whether refinance 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.
