Beware Refinance Fees
Many homeowners are blissfully unaware of just how expensive break costs can be, until they themselves want to get out of their contract.
Take a standard $300,000 mortgage with a fixed rate of 9 per cent. The break fees can be as much as $10,000. Now, you might save around $7800 in the first year by just refinancing to the current variable rate of around 5.7 percent, but what if interest rates rise in the near future? The $2,000 or so that you save in the first year could be lost. Exit fees are like an early termination fee. You will be charged a break fee if you "break" the contract and repay your loan within the first five years. typically apply if you refinance or repay your loan within the first five years. Break costs go up as interest rates come down. That’s because break costs represent the difference between the total interest you agreed to pay for the fixed term of the loan and the current interest rate.It's also a good idea to find out about any establishment fees to set up your new loan. Because if there are, any savings made in the first year of refinancing can be swallowed up.
See what other costs apply, for example, stamp duty, legal and property valuation and mortgage insurance if you need to borrow more than 80 percent of the property's value.
The costs associated with refinancing can prove too much for some. However, if you do your research, consult a mortgage advisor and find the right home loan, refinancing can prove very beneficial.
Talk to a refinance expert about your options to see what will really suit you. You can call us on
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