Switching Home Loans

Home owners consider switching home loans to ensure they have the best possible deal and if they can get a better interest rate. While they may be able to save money, what some don???t take into consideration is just how easy or difficult it is to switch.

According to RateCity???s Switching Scorecard in August 2010, switching home loans had a poor rating and can be one of the most difficult financial products to switch.

The reason for this is because of the detailed paperwork, the size of the contract and the fees and charges involved in switching home loans. RateCity found the average home loan application fee was $486 and the average discharge fee that financial charge was around $302. The break costs vary according to the length of the loan still outstanding, the balance owing as well as 16 other fees and charges such as legal fees, settlement fees, valuation, administration and ongoing fees.

Also if the borrower???s original home loan is part of a package deal it could be more difficult to switch loans because of the other financial products that are linked to the home loan package. This means, if you wanted to switch home loans you might have to switch all of your other accounts too because once you switch your home loan the fees and your interest rates on your other accounts could increase and not be worthwhile keeping the package any longer.

Another reason is there is currently not enough regulation from the Government or consistency across all financial institutions. Because of this definitions and fees could have different meanings between institutions. For instance, RateCity monitors over 30 different fees associated with home loans, but some of these may be the same thing but referred to as another name.

If you are not happy with your current rate or just want to see what else is on the market, compare home loans online. For a list of some of the best variable rate home loans, take a look at the table below. Before you consider switching home loans, do all the calculations of costs involved and work out if you will be better off.