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Submitted by: Kimberley Ash

Refinancing (switching to a new loan or lender) can be a positive move if your current lender is not offering you competitive rates but can be tragic if you are not keen on the numbers.

Although switching your home loan to a different lender can save you up to thousands of dollars, there are various costs you need to be aware of to avoid having a costly process. If you are considering switching lenders and you are shopping around, dont fall for the first mortgage that looks appealing to your eyes. Try and understand the hidden costs involved and any other benefits you are likely to get before jumping ship.

The golden rule of switching home loans is to ensure that whatever you are going to save in repayments by moving your home loan should outweigh the costs you incur to make the switch. You can use our home loan calculator to find out what youll be able to save. Work out the interest cost on your current loan and note it down and then enter the details of the new loan you are considering into the loan calculator. The difference between the two numbers is what youll be able to save.

The costs you may have to bear to refinance can be tricky and not as straightforward. They include:

Stamp Duty – Depending on the mortgage, you may have to pay around 0.35 percent stamp duty when switching your home loan.

Break Costs – This is charged by your current lender for not honoring the loan terms. The cost varies depending on the amount you still owe, the interest rate your home loan was secured under and the period remaining for the fixed rate to reach its term. If managed poorly, this cost can run into thousands.

Lenders Mortgage Insurance (LMI) – When you switch your home loan, some lenders may require a new appraisal of the property. If your new appraisal is lower than you had planned, you might be required to pay mortgage insurance. To avoid running into extra costs of up to 2% of your loan, ask your mortgage broker for an up to date valuation before submitting your refinancing application.

Mortgage Discharge Fees – Check the fine print of your mortgage agreement to find out if your lender charges discharge fees. This fee ranges between $150 to 500 but together with the government charges, you may end up paying up to $1,000. You can always talk to your lender to find ways to reduce on these charges.

As you shop around for lenders, you should aim to switch to a loan that will allow you to recoup your total costs of refinancing within a period of not more than 18 months.

Mortgage Discharge Fees – Check the fine print of your mortgage agreement to find out if your lender charges discharge fees. This fee ranges between $150 to 500 but together with the government charges, you may end up paying up to $1,000. You can always talk to your lender to find ways to reduce on these charges.

As you shop around for lenders, you should aim to switch to a loan that will allow you to recoup your total costs of refinancing within a period of not more than 18 months.

About the Author: About the AuthorKimberley A is an expert property adviser and professional from North Sydney, Australia. The author loves to share her experience on the topics like home loan brokers, types of home loans, big lenders, how to get loans approved, etc. so that latest property and home loan updates can be made available for the buyers before making any deal. For more details visit –

thefinancesite.com.au/

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