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Deferred Establishment Fee
Deferred establishment fees, or early exit fees, are penalties incurred when a borrower switches to another lender ending an existing mortgage contract before the end of an agreed period.
Some deferred establishment fees are a fixed charge, while others are calculated as a percentage of the total balance outstanding.
Regulatory changes
In the past many lenders relied on these fees for customer retention, but legislation changes in 2011 meant excessive deferred establishment fees would be abolished.
As a result of regulation changes, among other contributing factors, many lenders moved to dump deferred establishment fees.
It's good news for borrowers who are given greater bargaining power in the mortgage market as a result.
Positive reinforcement
In an effort to deter borrowers from switching, many lenders have developed more creative retention methods, such as providing rewards to loyal customers, in the place of deferred establishment fees. For instance, some home loan providers introduced loyalty discounts for customers who held mortgages with the one institution for a certain period, such as a year.
With less deferred establishment fees being charged in 2011, the number of borrowers refinancing mid-year increased as customers sought out better deals on their home loans.
If you're in the market for a better mortgage first contact your lender, ask if they are prepared to offer you a better deal in the form of a rate discount, for instance. If they're not willing to budge, then find out if you"ll face any fees for switching such as deferred establishment fees, and if not then compare mortgage options online at RateCity.
That's because by shopping around you could save hundreds if not thousands of dollars over the life of your loan. For example, if you have a $300,000 mortgage with a rate of 7 percent over 25 years and switch to a rate of 6.59 percent then your monthly repayments may be reduced by around $90. That's an annual saving of $1080 and $27,000 over 25 years. Clearly, borrowers now have even greater power to negotiate better rates as deferred establishment fees drop away, so why not assess your options.
The table below displayed today's best mortgages available on RateCity.
Some deferred establishment fees are a fixed charge, while others are calculated as a percentage of the total balance outstanding.
Regulatory changes
In the past many lenders relied on these fees for customer retention, but legislation changes in 2011 meant excessive deferred establishment fees would be abolished.
As a result of regulation changes, among other contributing factors, many lenders moved to dump deferred establishment fees.
It's good news for borrowers who are given greater bargaining power in the mortgage market as a result.
Positive reinforcement
In an effort to deter borrowers from switching, many lenders have developed more creative retention methods, such as providing rewards to loyal customers, in the place of deferred establishment fees. For instance, some home loan providers introduced loyalty discounts for customers who held mortgages with the one institution for a certain period, such as a year.
With less deferred establishment fees being charged in 2011, the number of borrowers refinancing mid-year increased as customers sought out better deals on their home loans.
If you're in the market for a better mortgage first contact your lender, ask if they are prepared to offer you a better deal in the form of a rate discount, for instance. If they're not willing to budge, then find out if you"ll face any fees for switching such as deferred establishment fees, and if not then compare mortgage options online at RateCity.
That's because by shopping around you could save hundreds if not thousands of dollars over the life of your loan. For example, if you have a $300,000 mortgage with a rate of 7 percent over 25 years and switch to a rate of 6.59 percent then your monthly repayments may be reduced by around $90. That's an annual saving of $1080 and $27,000 over 25 years. Clearly, borrowers now have even greater power to negotiate better rates as deferred establishment fees drop away, so why not assess your options.
The table below displayed today's best mortgages available on RateCity.
