02.Mortgage switching costs
MoneySmart's mortgage switching calculator
can help you work out the costs of changing your mortgage, how long it will take to pay off the cost of the switch
, and the difference in payback times.
Watch out for fees that can offset any savings made by switching to a lower interest rate. These incude:
- establishment fees
- early termination fees
- break fees
- administrative costs
- valuation fees
- legal fees
- Lenders Mortgage Insurance (LMI)
Mortgage lenders cannot charge early termination fees
on new variable home loans taken out from 1 July 2011. However, variable rate home loans taken out before that date may still incur early termination fees.
on fixed rate loans can still be charged if you switch within the fixed-rate period, and with some lenders offering interest rates below five per cent, these loans can be very appealing. But if you’re likely to need to refinance soon, fixed interest rates could end up costing you more in break fees than what you’d save by moving to a lower interest rate.
If you break a loan with a fixed rate of 7.5%, but the interest rate your bank currently offers is six per cent, you may have to pay the 1.5% differential. Ask your lender for the amount for which you may be liable before switching.