Let’s look at the most painful refinancing fees and charges (and ways to minimise them)
In today’s inflationary environment, refinancing your mortgage can be a smart move.
While the basic idea of refinancing – switching to a loan with a lower interest rate or better conditions – seems straightforward, it’s also important to consider any associated fees and charges to ensure the move is actually worth it.
In simple terms, this means weighing your upfront costs (payable to both outgoing and incoming lenders, plus any state government charges) against long-term benefits to ensure that these costs don’t negate the advantages of refinancing.
In this article, I’ll take a look at some of the most common fees and charges you might have to pay when you refinance a mortgage.
1) Mortgage Application/Establishment Fee
Your new lender may charge this fee to cover the administrative costs of setting up your loan. These fees vary, so it’s important to inquire with potential lenders about their specific charges.
2) Valuation Fee
This fee is for the valuation of your property, which your new lender might require to assess its market value. The amount can vary based on the property’s location and the lender’s policies.
3) Settlement Fee
At loan settlement, lenders often charge a fee to cover legal representation and associated paperwork.
4) Lender’s Mortgage Insurance (LMI)
If your loan-to-value ratio exceeds 80%, you’ll likely need to pay LMI. Remember, LMI is not transferable between loans or lenders; a new loan means a new LMI policy.
5) Break Fee
If you’re breaking a fixed-rate home loan term, you’ll need to pay a break fee. This fee depends on several factors, including the remaining period of your loan and the loan amount.
6) Discharge Fee
This fee covers the administrative costs of closing your old mortgage.
7) Legal Fees
Your outgoing lender might charge additional legal fees for services beyond standard settlement procedures.
8) Exit Fee
Though less common due to recent reforms, if your loan predates 2011, you might face an early exit fee.
9) Mortgage Registration Fees
These government-imposed fees are for registering your mortgage and ensuring the lender’s security.
Refinancing can be a powerful tool for reducing your monthly repayments and improving your financial situation, but it’s not a “one-size-fits-all” solution. Your decision should be based on a thorough analysis of your current situation and potential costs, versus long-term savings.
Your decision should also be based on the loan options that are available to you. If you’d like help assessing your options, from multiple lenders, speak with us.
In as little as fifteen minutes on the phone with us, you could have a better understanding of the exciting refinancing options available to you.
Working with a Virtus broker can significantly reduce the pain of these refinancing fees and charges. Here’s how:
1) Comprehensive cost analysis
After a short conversation about your current situation, we’ll provide a detailed and personalised cost-benefit analysis ensuring that refinancing truly serves your financial goals.
We’ll take into account your fees and charges (and any potential savings from a lower interest rate, which may also be possible), juxtaposing them with long-term savings. This cost analysis is the most important part of the refinancing process.
2) Expert negotiation, via priority access and ‘premium’ status
At Virtus, we have priority access to senior credit officials and a ‘premium’ status with many lenders. This means we have the ability to negotiate better terms and lower fees, often securing deals that aren’t directly available to other consumers. This is an exciting reason to choose Virtus over other brokers.
3) Tailored lender matching
We’re experts at matching you with lenders whose fee structures and loan terms align with your financial situation, minimising unnecessary costs. Unlike many other brokers, we also view your situation from a long term perspective, ensuring that your current lending doesn’t inhibit your future goals.
In this quick phone call with a Virtus mortgage broker, we’ll quickly evaluate your options and give you a better understanding of your refinancing options moving forward.
We’ll quickly be able to explain your potential savings. And we’ll also explain the process for getting you there.
In summary, our free credit assessment helps you:
Unlike some banks (where you often meet with a junior employee), and some other brokers (where you meet with a commission salesperson), your free credit assessment at Virtus is with a lending specialist who will give you expert, independent advice specific to your situation.
Don’t delay anymore. A quick phone call with us could be a game changer.
When buying a property in Australia, it is important to consider the cost of any necessary renovations to cover any unexpected expenses.