With so much change on interest rates recently and approximately half of all fixed-rate loans expiring this year, refinancing is on many people’s minds.
1. Mortgage application fee
If you’re changing lenders, you will likely have to pay a mortgage application or establishment fee. This covers the cost to your new lender of processing your application.
This upfront cost usually ranges from $200 to $1000, depending on the lender and the type of loan. It could also include a valuation fee.
2. Loan discharge fee
Saying goodbye to your existing lender will likely result in a discharge fee for the administrative costs associated with ending your mortgage. Often loan discharge fees are around $200-$400. However, they can go up to $1000.
3. Property valuation fee
Your new lender may need a valuation to be done when reviewing your refinancing application. The cost mainly depends on the lender and the location of the property – expect to pay more for rural properties. Valuation fees may vary from $200 to $600 in cities, and $600 to $1000 in rural areas. Some lenders offer free property valuations.
4. Break fees
If you are on a fixed rate loan, you most likely will have to pay break fees to get out of it early. Break costs can be costly and difficult to calculate. The simplest way to know your break costs is to ask your current lender for a rundown.
5. Settlement fee
Remember paying a settlement cost when you initially took out your loan? You’ll be up for that again if you decide to refinance. Settlement fees are paid to the new lender to settle the loan and usually range from $100 to $400.
6. Mortgage registration fees
The land registry in your state or territory will charge a mortgage registration fee to register your mortgage on the title record for the property. The cost could range from $120 to $210.
7. Exit fees
The Federal Government got rid of exit fees from 1 July, 2011 – but this is only for contracts signed after this date. If you signed previously, you may pay exit fees for terminating your loan early. Check with your lender if you’re not sure.
How much refinancing can save you
While all of the costs outlined above may seem vast, it’s important to think about the long-term advantages of refinancing. The amount of money you could save by refinancing depends on the size of your mortgage, how many years you have left on the loan, how much lower the new interest rate is and whether it has interest-saving features.
Like to discuss your options?
As your 1st Street Mortgage Broker, we can help you decide whether refinancing is the right move for you in the current economic climate. We can help you weigh up the costs versus the benefits of refinancing and clarify whether a different loan could better suit your financial situation and goals. Get in touch with us today.
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