What are the Costs of Refinancing a Home Loan?

What are the Costs of Refinancing a Home Loan?

Mortgage no longer working for you? A lot of people find themselves paying more than they’d like to on their home loan when they could potentially get a better deal by checking out the offers that competitors provide. Refinancing can be a great option for lowering your repayments – but there’s always a risk that you could be hit by the horror of mortgage exit fees.

The good news about exit fees is that sometimes it depends on when you entered your mortgage, as to whether you’ll have to pay them. Home Loan Cash Back, we simply ask you to stay in your mortgage for at least two years to make sure you don’t lose any all-important commission. Since we’re all about giving you the best possible deal at Home Loan Cash Back, we thought we’d give you a quick expert guide to exit fees, and whether you need to pay them.

What Does the Law Say about Exit Fees?

In the past, lenders were able to charge borrowers that repaid their loan ahead of time an exit fee. At These exit fees were apparently designed to help the lender cover the cost of the interest they lost out on over the remainder of the loan period. Usually, these exit fees were restricted to the first five years of a mortgage and could differ in amount between fixed-rate loans, and variable loans.

Fortunately for borrowers. The Federal Government removed all exit fees for home loans in 2011. That means new mortgages should not include any exit fees on your terms for repayment. If you’re concerned that your lender might just give the fee a different name – then don’t be, because that’s against the law. If a lender attempts to impose an exit fee or similar, they can be fined.

So, Do You Need to Pay One?

The downside of the exit fee situation is that the ban only applies to home loans that have been taken out since July 1st, 2011. That means that if you entered into your current mortgage before the first of July 2011, and you’re trying to refinance or pay off your loan, you’re probably going to need to pay exit fees. To help you get a better idea of what’s expected from you, check out the terms of your mortgage agreement for more information.

On the other hand, if you’re just entering into your mortgage now, then your loan agreement shouldn’t include any exit fees. If you find that the agreement you get does include exit fees, then hold off on signing it. In fact, you should probably bring the offer to the attention of your loan officer, because it’s illegal.

What to Know about Paying Exit Fees

If you want to refinance your current mortgage, or you’re looking for an opportunity to pay it off entirely, then you need to make sure that you know whether or not you’ll have to pay an exit fee. If you do have to pay fees to get out of your mortgage, then you’ll need to consider the amount of the fee that you’ll have to pay, and whether it’s better for you to see out the remainder of your loan.

If you only have a very small amount remaining on your mortgage, then a large exit fee may cost more than the additional interest you would have to pay by simply allowing the loan to continue until the end. Similarly, refinancing your deal to something more attractive can become more troublesome when you add on the price of an exit fee.

Even if you got your mortgage quite a while ago, there’s still a chance you can avoid paying an exit fee. Remember that some lenders no longer charge customers for exiting early, and Home Loan Cash Back can help you find the deal that works best for you.