RateCity
Early Exit Fees
Early exit fees are what a lender may charge borrowers who want to break from their mortgage contract early.
The amount that you may have to pay depends on a number of factors such as the loan amount, type of loan, how long you've had your loan for and your financial institution.
Usually, the longer you have been in your home loan the less you have to pay. Typically within the first five years it costs more to exit from your mortgage.
There are also costs such as application fees, for setting up your new home loan. These can cost $486 on average, according to RateCity.
Also be aware there are around 16 other types of charges that you could be charged for setting a new loan, including legal fees and settlement fees.
The good news is that the Australian Securities and Investments Commission (ASIC) haves tightened the regulation on excessive early exit fees. As a result several of the top banks in November 2010 have reduced or cut out their early exit fees.
If you have a home loan and are considering switching to another lender, below are some tips that could assist you in making the decision:
- Shop around to see what rates other lenders are offering in comparison to what you are currently paying. Use websites such as RateCity to compare home loans and to work out if you are financially better off switching.
- Determine the total cost of exiting your loan as well as setting up a new loan.
- Arrange to meet with your current lender to negotiate on your interest rate. Show them the comparison results so they can see what other lenders are offering.
- If you decide to switch, notify your current lender first, before you apply for the new loan.
- Then after you have spent some time researching the market and you are sure you want to switch, apply for your new mortgage.
