Early Repayment Fees

Borrowers must be mindful of any early repayment costs (ERCs) or exit fees on your present agreement before considering a remortgage, even if it may enable you to lower the amount of your loan and maybe achieve a cheaper rate.

Because you are terminating your current agreement before its term has ended, early termination fees (ERCs) may be assessed. Lenders can charge prepayment penalties to make up for foregone interest payments. Due to the fact that ERCs are often calculated as a percentage of the principal balance, they typically decrease when the loan is paid down.

Verify your existing mortgage agreement for early repayment charges (ERCs) and weigh them against the potential savings from switching to a new mortgage.

The cost might be paid up front or rolled into the principal of your new mortgage. However, if you raise the amount, your loan-to-value ratio will also rise.

Whether you want to know if your existing mortgage has any early repayment fees, you should talk to your lender or a mortgage broker. 

The transfer of title deeds from your existing lender to your current attorney may include a “admin charge,” sometimes known as a “deeds release fee,” which must be paid to your existing lender. Your lender and attorney may charge you additional costs, the amount of which varies depending on the specifics of your case.

Booking and Application Fees

Pay close attention to your mortgage arrangement cost, often known as a product fee, booking fee, or application fee. Keep in mind that certain mortgages may seem to have incredibly low interest rates, but the hefty fees still make them more costly in the long run, so you should always pay close attention to the costs when selecting a mortgage.

The arrangement fee may often be paid at the outset, or it can be tacked onto the mortgage balance. If you have already paid the amount in advance and the deal falls through, you will probably not receive a refund. However, interest will be charged if you choose to roll the cost into your mortgage payments.

If you add the cost to your mortgage, however, most lenders will let you make overpayments of up to 10% annually without charging you any fees. To prevent paying any interest on the money you’ve overpaid, it’s a good idea to double-check with your lender to see whether this is a possibility.

Conveyancing and Other Fees

Common with remortgages is a free set of legal services.

The only possible drawback is that the creditor usually chooses the attorney, which might delay down the process.

Note that no free legal package will cover the cost of having a partner added or removed from your mortgage, since this is considered to be a significant amount of labour. Therefore, you should consult your lawyer about this.

Mortgage lenders may also charge you something called a “reservation fee” in order to lock in a discount or a fixed interest rate on your new loan.

This cost is typically paid at the time of application submission and is non-refundable in the event that the acquisition of the property falls through.

1. Your present mortgage agreement are expiring or have expired

Therefore, you may be subject to, or already on, the Standard Variable Rate from your lender, which is often much higher than your original or fixed rate. Statistics from Experian show that over 1.5 million borrowers will be subject to their lender’s standard variable rate (SVR), which, depending on the size of your mortgage, may cost you thousands, if not tens of thousands, in additional interest.

2. Mortgage rates are rising

In the year and a half leading up to May of 2022, mortgage rates rose at their quickest rate in a decade. Since December 2021, the RBA base rate has been raised by a total of 1.25%, and more increases are widely anticipated this year. Lenders are regularly pulling the greatest offers, so it’s in your best interest to move quickly and lock in a fixed rate loan.

3. Enhanced flexibility and increased number of options

Since signing your mortgage contract, your financial circumstances might have changed, prompting you to consider making overpayments or perhaps switching to an interest-only or offset mortgage. Change to a mortgage plan that provides more leeway if you need or desire that kind of freedom.

4. Market and home price uncertainty

There is significant ambiguity as to whether home prices will decline over the next several years in certain areas of Australia, and the present view for the housing market is not very optimistic.

If you’re thinking to yourself, “Well, I’m not planning to relocate, therefore this does not affect me,” that’s OK. If you need to refinance soon but property values drop in the future, you may end up with a larger loan-to-value ratio and a more costly mortgage.

5. Capital raising on your property

Refinancing your mortgage may be a great way to get cash out of your house to make repairs or renovations that will increase its value, or to put towards the down payment on a second home or investment property.

How do you find success?

Major financial choices, like a refinance, should always be discussed with an impartial third party. We can assist you by analysing your situation and needs to determine the optimal course of action. If you’re interested in refinancing your mortgage, please contact us right away.