Refinancing your home loan can be a great way to save money on interest. You can do this by getting a lower rate, shortening the loan term, or consolidating other debts into your home loan. You can also access cash, or change the features of your loan. However, it is important to weigh the cost of refinancing, along with the benefits, before making a decision.
What are the Costs of Refinancing?
- Discharge Fee
- Break Cost
- Mortgage Registration Fee
- Application and Settlement Fee
- Property Valuation Fee
- Title Search Fee
Here is a breakdown of the costs of refinancing.
Closing Costs
- Break cost: If you leave your fixed home loan early, your lender may charge you a break fee. This covers potential losses the lender might experience because of your early exit. Each lender has its own way of calculating break cost, depending on various factors like your fixed-rate term remaining, interest rate, and repayment amount.
- Discharge fee: Your existing lender may charge you a fee to exit the mortgage. The discharge fee typically covers administrative costs associated with terminating the existing mortgage agreement, such as paperwork, processing, and lien release. The amount will depend on the lender.
New Loan Costs
- Mortgage registration fee: Your new and existing bank may charge to register and deregister your mortgage, respectively. The fee charged varies accross states.
- Application fee: The lender charges this fee to cover the costs of processing your new application.
- Refinance Settlement fee: This is applied to cover the administrative and legal expenses related to finalising the refinancing process.
- Property valuation fee: This can vary according to property type and location. The new lender will charge around $300 to $600 to have your property valued.
- Title search fee: The new bank will run a title registry search to check for any liens, easements, or other encumbrances on the property’s title, ensuring that the buyer is getting a clear title to the property.
Not all banks charge all these fees!
You can contact us to get a rough estimate of the mortgage refinance fees.
You May Qualify For A Refinance Cashback
Several banks may provide a cashback to refinance your home loan to them.
The rebate amount will depend on whether you’re an existing customer or a first-home buyer.
Apart from cashback deals, banks also offer discounts on Lenders Mortgage Insurance (LMI) and application fees, as well as a refund on the annual fee for professional package home loans.
These rewards can be tempting, and lenders offer them regularly, but you shouldn’t refinance purely for cash back.
Consider taking advantage of attractive offers, as the refinancing process is much more straightforward than it used to be.
What Other Factors Should I Keep In Mind When Refinancing?
Apart from the direct costs of refinancing, there are other costs or consequences that borrowers often overlook:
- Doubling up on LMI: Lenders Mortgage Insurance is charged by lenders when you borrow more than 80% of the property value, so if you owe more than 80%, you may end up paying LMI again.
- Adding enquiries to your credit file: Shopping around with many lenders can leave multiple enquiries on your credit file, making a negative impact on your credit score and, ultimately, your chances of approval. More than two enquiries in six months can significantly limit the number of lenders with which you are eligible to refinance.
- Services of the new lender: There can be various issues with a bank, including below-par customer service, a slow and painful loan or post-settlement process, or no branch access.
Are You Eligible To Refinance?
You should check with your mortgage broker to discover whether you’re eligible to refinance your home loan. Various factors may restrict your ability to refinance. Ideally, you should owe less than 90% of the value of your property.
Call us today on 0423 459 480 to learn more about the cost of refinancing and your refinancing options.
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