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The federal government’s decision to ban home loan exit fees from July 1 is causing confusion among property buyers with many borrowers unsure whether to switch now or later according to broking group Mortgage Choice.
“Borrowers considering switching to a new product with the same lender or refinancing their loan to a new lender altogether should note the government’s abolishment of mortgage exit fees applies only to home loans approved after July 1,” said Kristy Sheppard, Mortgage Choice spokesperson.
“If your home loan has an exit fee and/or you switch to such a home loan before 1 July, you may have to pay that fee after the abolition date has passed– but only if moving to a new product within the period outlined in the contract. “In comparison, if refinancing after July 1 you need to consider exit fees only if one is attached to your existing home loan because the new loan will be exempt.”
Ms Sheppard said potential refinancers must ask themselves: will I miss out on the home loan best suited to me because I was worried about possibly coming across an exit fee down the track?
Mortgage Choice’s recent refinancer survey found 46 per cent of refinancers didn’t pay exit fees and 22 per cent paid $500 or less.
“Two other important points are that the exit fee ban does not include break costs, charged when borrowers switch or repay their fixed rate loan before the fixed term expires, and a number of lenders have already removed exit fees from their home loans. Some never had exit fees.
“So, many people need not be concerned about the July 1 deadline, however it’s best to be informed and understand the fine print. Exit fees should be part of the consideration equation but not the sole basis for choosing to refinance or stay put. It is important to factor in all aspects of a loan. A professional, experienced mortgage broker can help with this.”