The Cost of Refinancing Your Home

While the allure of lower interest rates and reduced monthly payments is enticing, refinancing isn’t a cost free endeavour.

It’s crucial to understand the various fees associated with refinancing your home loan. We explain them here.

The price tag of refinancing – there’s more than meets the eye.

Discharge fees
Think of this as your old lender’s ‘farewell’ gift. This fee covers the administrative costs of closing your existing loan. Depending on your lender and loan type, it could be a few hundred or even thousands of dollars.

Application fees
Your new lender wants a piece of the pie too by charging an application fee to process your refinancing request. This fee can vary considerably between lenders. That’s why we research a range of lenders for you to find loan options that are suitable to your circumstances.

Valuation fees
Lenders need to know the current market value of your property, so they’ll commission a valuation. This fee can be a few hundred dollars or more depending on the size and complexity of your property.

Government fees
Depending on your state or territory, you will need to pay registration fees and stamp duty.

Lenders’ mortgage insurance (LMI)
If you’re borrowing more than 80% of your property’s value, you’ll likely need LMI. This insurance protects the lender, not you, if you default on your loan.

Other fees
Remember potential legal fees, title search fees and other miscellaneous costs that could pop up during the refinancing process.

While the upfront costs might seem overwhelming, remember that the potential long term savings by obtaining a lower interest rate or shorter loan term can significantly outweigh these.

Our finance team can help you assess the overall financial impact of refinancing and determine if it’s the right move for you.

Refinancing is often surrounded by myths that can deter homeowners from taking advantage of its benefits. Let’s set the record straight by debunking some of these.

Myth 1 – Refinancing is an administrative nightmare.
The process does involve paperwork and research, but it’s not rocket science. With our finance team’s assistance, we can streamline the process and guide you through the maze of paperwork and compare different loan options on your behalf.

Myth 2 – Only those with a perfect credit score can refinance.
While a good credit score may help you secure a lower interest rate, it’s not the only factor that lenders consider. They also look at your income, employment history and debt-to-income ratio. Don’t assume you’re ineligible just because your credit score isn’t perfect.

Myth 3 – Refinancing always leads to savings.
This isn’t always the case. It’s crucial to carefully compare your current loan with potential new ones by factoring in all the costs involved. Sometimes, the savings might not be significant enough to justify the hassle and expense of refinancing.

Myth 4 – Refinancing is a one-time deal.
While there’s no limit to how often you can refinance your mortgage, it’s crucial to weigh the potential benefits against the costs involved each time. Refinancing does come with expenses, and those can add up. Furthermore, each loan application triggers a credit inquiry, which can temporarily affect your credit score. We’ll strategically manage the refinancing process to minimise any potential drawbacks and maximise your chances of securing the most appropriate outcome.

Factors to consider when refinancing
Refinancing can be a powerful tool for achieving your financial goals, but it’s not a one size fits all solution. Consider the following factors before making a decision:

• Your financial goals
  Are you looking to lower your monthly payments, shorten your loan term, or tap into your home’s
  equity?
• How long do you plan to stay in your home?
  Refinancing usually makes sense if you plan to stay in your home long enough to recoup the closing costs through your savings.
• The current interest rate environment
  If you have rolled over from a low interest rate to a much higher one with your current lender,
  renegotiating with them or refinancing to another lender could be a great way to save money.
• Loan servicing
  If you are unhappy with your current lender’s customer service, refinancing provides an
  opportunity to switch to a lender who better meets your needs.
• Access to additional lenders
  Refinancing opens doors to a wider range of lenders and loan products, potentially giving you
  access to more favourable terms or features not offered by your current lender.

Allow us to help you
By using our finance services, we will take the time to thoroughly research your options, compare lenders and crunch the numbers to determine how much your interest payments could be reduced.

Our expertise can offer valuable insights and guidance throughout the process that you may find challenging to navigate alone.

Remember, refinancing is about achieving your finance goals. So take the time to make an informed and confident decision that sets you up for success.