The Price Tag of Refinancing
While the allure of lower interest rates and reduced monthly payments is enticing, refinancing isn’t a cost free endeavour. It’s crucial to understand the various fees associated with refinancing your home loan. We explain them here.
Potential costs to consider:
- Discharge fees – Think of this as your old lender’s ‘farewell’ gift. This fee covers the administrative costs of closing your existing loan. Depending on your lender and loan type, it could be a few hundred or even thousands of dollars.
- Application fees – Your new lender wants a piece of the pie too by charging an application fee to process your refinancing request. This fee can vary considerably between lenders. That’s why we research a range of lenders for you to find loan options that are suitable to your circumstances.
- Valuation fees – Lenders need to know the current market value of your property, so they’ll commission a valuation. This fee can be a few hundred dollars or more depending on the size and complexity of your property.
- Government fees – Depending on your state or territory, you will need to pay registration fees and stamp duty.
- Lenders mortgage insurance (LMI) – If you’re borrowing more than 80% of your property’s value, you’ll likely need LMI. This insurance protects the lender, not you, if you default on your loan.
- Other fees – Remember potential legal fees, title search fees and other miscellaneous costs that could pop up during the refinancing process.
While the upfront costs might seem overwhelming, remember that the potential long term savings by obtaining a lower interest rate or shorter loan term can significantly outweigh these.
Our team of Lending Experts can help you assess the overall financial impact of refinancing and determine if it’s the right move for you.
