Costs of Refinancing a Property

Before refinancing your loan it is imperative to make sure that it is the right thing to do for your situation. Are you going to be in a better financial situation overall? Are you fed up with your existing lenders service? Has your existing lender said they will not lend you any more money? Are there new products available with other lenders that you could take advantage of?

It is best to decide first why you want to refinance. The next step is to analyse the costs involved to make sure you will be better off by refinancing. Some of the major costs involved include:

Lenders Fees

The lenders costs for setting up a new loan facility range from $0 to $1500 depending on the type of loan facility.

Mortgage Stamp Duty

Only applicable on the 'up stamp' amount (the loan above the original borrowed amount) in most states.   Check with the State Revenue offices for exact details.

Mortgage Registration and Deregistration Fees

This is a state government fee for taking out a new loan and also paying out an old loan. A separate fee will apply for both and varies from state to state.

Your legal costs

if you use a solicitor or conveyancer, it will cost around $650. Many people do not use a solicitor or conveyancer for refinances.

Your lender's legal costs

Some lenders require you to pay their legal costs. If this fee is applicable it may cost approximately $450.00

Lenders Mortgage Insurance

Will apply if you borrow more than 80% of the value of your property (although this will vary from lender to lender). Lenders Mortgage Insurance can be expensive, especially if it was already paid on the original loan.

Lenders Early Payment or Termination Penalty

Some lenders charge an exit penalty if you cancel their loan within a certain time frame e.g. 4 years. The fee and the time frame that it will be applicable, will be stated in the original loan contract

Mortgage Discharge Fee

This is an administration fee that all lenders charge to prepare the legal paperwork to cancel your mortgage contract with the lender. The fee will range from $50 to $450.

Possible Break Fee's

if you cancel a fixed rate loan before the end of the term, a penalty fee could be payable. You will need to ask your lender for a calculation.

Once you have outlined all the major costs it would be beneficial to compare these with any potential interest savings that a new lender would generate. However, you may need to take into account more than the interest savings if your existing lender will not lend you any more money or you are seeking different features and benefits that your existing lender cannot offer. Sometimes it is worth discussing your concerns with your existing lender to see if they will meet your current needs as they may be keen to retain your business if you say you are going to leave. Sometimes it might be worth considering professional packages as they bundle together a range of services for one yearly fee, this could potentially save you money in the long term.

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