While the allure of lower interest rates and reduced monthly payments is enticing, refinancing isn’t a cost free endeavor. It’s crucial to understand the various fees associated with refinancing your home loan. We explain them here.
“The price tag of refinancing – there’s more than meets the eye“
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.
Refinancing is often surrounded by myths that can deter homeowners from taking advantage of its benefits. Let’s set the record straight by debunking some of these.
Myth 1 – Refinancing is an administrative nightmare.
The process does involve paperwork and research, but it’s not rocket science. With our finance team’s assistance, we can streamline the process and guide you through the maze of paperwork and compare different loan options on your behalf.
Myth 2 – Only those with a perfect credit score can
refinance.
While a good credit score may help you secure a lower interest rate, it’s not the only factor that lenders consider. They also look at your income, employment history and debt-to-income ratio. Don’t assume you’re ineligible just because your credit score isn’t perfect.
Myth 3 – Refinancing always leads to savings.
This isn’t always the case. It’s crucial to carefully compare your current loan with potential new ones by factoring in all the costs involved. Sometimes, the savings might not be significant enough to justify the hassle and expense of refinancing.
Myth 4 – Refinancing is a one-time deal.
While there’s no limit to how often you can refinance your mortgage, it’s crucial to weigh the potential benefits against the costs involved each time. Refinancing does come with expenses, and those can add up. Furthermore, each loan application triggers a credit inquiry, which can temporarily affect your
credit score. We’ll strategically manage the refinancing process to minimise any potential drawbacks and maximise your chances of securing the most appropriate outcome.
Factors to consider when refinancing
Refinancing can be a powerful tool for achieving your financial goals, but it’s not a one size fits all solution. Consider the following factors before making a
decision:
• Your financial goals – Are you looking to lower your monthly payments, shorten your loan term, or tap into your home’s equity?
• How long do you plan to stay in your home? – Refinancing usually makes sense if you plan to stay in your home long enough to recoup the closing costs through your savings.
• The current interest rate environment – If you have rolled over from a low interest rate to a much higher one with your current lender, renegotiating with them or refinancing to another lender could be a great way to save money.
• Loan servicing – If you are unhappy with your current lender’s customer service, refinancing provides an opportunity to switch to a lender who better meets your needs.
• Access to additional lenders – Refinancing opens doors to a wider range of lenders and loan products, potentially giving you access to more favourable terms or features not offered by your current lender
Ready to reduce your interest payments and achieve your financial goals? Let our finance experts do the heavy lifting for you. We’ll research, compare lenders, and break down the numbers, offering personalized insights every step of the way. Don’t navigate the complexities of refinancing alone—make an informed, confident decision that sets you up for success. Contact us today to get started!