Fees to Expect When Refinancing

Refinancing is a great way to take advantage of attractive offers from lenders. For example, if you're currently paying your mortgage and your credit card debts to separate lenders, you could consolidate it to lower your overall monthly payments. Another example would be to get refinancing to take advantage of lower interest rates, which could help you pay off your loans sooner, or make the payments easier on your finances.

However, you must also be aware there might be fees involved when you seek refinancing. Taking this into consideration would help you decide whether or not refinancing is indeed the right decision for you. These include:

  1. Switching fees and break costs. This generally refers to fees that come when you switch from a variable loan to a fixed interest rate loan and vise versa. However, if you switch from a fixed to a variable loan, your lender might also charge you a 'break cost'.
  2. Mortgage discharge fee. While the first item deals when you switch from one type of loan to another under the same lender, this one could apply when you switch or when you change lenders. The mortgage discharge fee is used to pay for the costs of closing your loan, including legal and administrative costs.

Why Lenders Require These Fees

Some fees, such as the mortgage discharge fee, are fairly straightforward that you know why lenders are charging them. But what break costs and the other fees? Lenders require this to make up for the money they will potentially lose when you pay off your loan earlier, or take advantage of lower interest rates.

It is therefore important that you take these fees into account when you consider getting refinancing. They could be one of the indicators that could tell you whether making the switch is worth it or not.

In addition, it also helps to know what the current rates are before you seek refinancing. The qualified advisors at Rate Detective can help you with this and show you the best deals from various lenders in the country. After all, you deserve to get the most out of your money, especially when it comes to your home loan.

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Published on October 10-nd, 2012 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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