What are The Hidden Costs of Switching Your Home Loan

Sometimes a home loan comparison can reveal a much better loan deal available in the market to a borrower. This can tempt you to switch to a different lender in order to save some money or stress. However, this doesn’t mean the switch is going to be affordable.

At Home Loan Comparison, we always recommend looking at all of the hidden costs involved in switching loans carefully. Here’s a look at the different hidden costs you might have to deal with:


  1. Lenders Mortgage Insurance

Lenders protect their interest through a lender’s mortgage insurance. When you switch from one lender to another, this insurance can cause trouble and add to your expenses. Before the refinancing is approved, the new lender will request a reevaluation of the property.

If the new property value turns out lower than you expected, you might have to pay lenders mortgage insurance. That’s why it is important to make sure your loan value is less than 80% of the property value.


  1. Break Costs

Break costs are applicable to fixed-rate loans because switching means you haven’t fulfilled the terms of the agreement set by the original lender. The break costs depend on your interest rate agreement for the fixed interest rate loan. The lenders will consider factors like the previous interest rate, current interest rate, and loan term before they decide on the break cost.


  1. Mortgage Discharge Fees

This is different from exit fees and is often an unexpected expense. The discharge fees can range from $150 to $500 based on the lender’s policies. Borrowers sometimes end up paying a $1,000 after adding government fees to this. It is a good idea to speak with your lender about these fees to see if you can get a discount.


  1. New Application Fees

You can’t apply for a new loan for free. A new lender will require application fees along with mortgage registration fees during the application process. You will have to pay around $400 to $750 for the first one and $100 to $140 for the second fee.


  1. Stamp Duty

Refinancing might require stamp duty of around 0.35% of the home loan value. This is one of the factors most borrowers fail to consider during their home loan comparison. In most cases, you will also have to pay additional GST.

If you want to know more, don’t hesitate to contact us at Home Loan Comparison on 0419 856 669.