You should never be too afraid to ask about the fees involved with your home loan.
Every borrower has the right to know their mortgage inside out and there are no exceptions.
It’s important that your lender is transparent about all of the fees associated with your loan you so can identify any opportunities to save. Before you decide on a loan, ask about the following little known fees so you are able to make an informed decision, and even avoid paying them.
Early exit fees
Early exit fees actually refer to several different fees you can be charged when you leave your loan early, before the term of the contract ends. These fees, which may consist of discharge fees, admin, break costs and early termination fees, are designed to compensate the lender for their loss of money when you leave your home loan. These fees are pretty unavoidable but some can be waived if you refinance within the same financial institution. Ending a fixed rate home loan contract early can incur higher break costs, so it’s a good idea to make sure you are planning to stick with your fixed rate term before signing up.
Account keeping fees
Lenders may charge account keeping fees to cover the administrative costs associated with managing your loan. This could be an annual, quarterly or monthly fee. But not all lenders charge this fee. It’s a lot easier to find lenders that don’t charge these fees when you compare home loans online. There is also the possibility of negotiating with your lender to waive these fees. Many lenders also offer promotions where they waive account keeping fees during the peak mortgage season in spring, or you could opt for an online lender as they generally charge less fees due to less overheads.
Lenders Mortgage Insurance
Lenders Mortgage Insurance (LMI) can cost you a considerable amount of money when you apply for a loan. If you have not saved up a deposit of at least 20 percent of the value of your home then you will be charged LMI. Most lenders will allow you to capitalise the cost into the loan but this will more than double the original fee because you’re paying it off over the length of your loan term. Some lenders offer you the option of a ‘family guarantee’ whereby your parents can put up part of the equity in their property as part of your deposit to help you avoid LMI. If you haven’t saved up a sufficient deposit you should calculate how much LMI you will have to pay to see if it is worthwhile waiting until you have a bigger deposit saved. For a guide on LMI, take a look here.
Like the name suggests, these fees are charged when you apply for a loan and includes the application, legal, settlement, valuation and administrative fees that cover the costs of setting up your loan. You should talk to your lender to find out exactly how much you are going to be because some of these fees may be avoidable. If you do your homework and know that some lenders don’t charge or waive these fees, you can use this to haggle out of paying them.
Home loans will be with you for a long time, so you should be aware of what you will be charged if your financial situation changes and you decide to refinance. Lenders can charge a huge amount of fees for refinancing a loan, which includes discharge costs from the original loan, to new application fees for the new home loan. You could find yourself paying thousands of dollars to refinance, so make sure you are aware of these costs up front. You can find out here how much it will cost you to refinance.
It’s important to ask your lender about all the fees associated with your home loan because you could potentially save yourself a lot of money down the line.
By comparing home loans online you can see the options that are out there and have more leverage when it comes to crunch time.