The Cost of Home Loan Refinancing
Refinancing can be a great way to save money, but you might incur costs such as exit and establishment fees, government charges and administrative or legal expenses. These costs need to be weighed against the benefits to determine if you’ll save in the long run.
Establishment fee is the upfront fee when you apply for a new loan. It is also known as application fee. Most of the major lenders do not charge an application fee if you take out a packaged loan with an annual fee. If you are switching to a basic loan product, this usually attracts an upfront fee. Other fees charged upfront are valuation fee, title insurance and settlement fee.
Lenders mortgage insurance
This often refers to the annual fees of $395 if you choose a packaged loan product. The benefits of a packaged loan are competitive interest rate, loan features such as an offset account, free valuations, credit cards with no annual fees, fee free transaction accounts and discounts in the bank’s general and life insurance products.
Discharge fee of exiting lender
Lenders charge a fee to close the loan down. Discharge fee range from $150 to $500 per loan account. If you have two accounts with the exiting lender, then you will be charged twice. If the discharge fee is $250, then you are charged $500.
State Governments charge a mortgage registration fee when you refinance. It is charged twice, once to remove the old lender and one to register the new.
Mortgage registration fees vary from state to state, so do your research on the Office of State Revenue website in your state to see how much it will be.
Speak to your new lender about the fees involved in setting up the new loan so you can factor these into your calculations.