In July 2011 home loan exit fees were abolished, except for any home loans that were signed prior to this date. But this only applies to variable home loans. If you have a fixed home loan there are still large fees that apply, called break fees.
What are break fees?
Break fees apply if you ‘break’ your fixed rate home loan. The break fee charges are normal very high but you won’t know how much unless you contact your lender. The amount does depend on the current interest rate and if the interest rates have come down since you started the loan. The lower the rates have come down, the higher the break fee. Contact your lender to find out exactly what costs you’ll be up for.
Despite exit fees being abolished there are other fees to consider when deciding whether to switch home loans. There are costs such as application, legal and settlement fees that need to be taken into consideration before you switch.
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 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 home loan.
While it could cost you to move, you may be better off. Just ensure that you do all of your calculations first and determine if you really can save more by making the switch.