Exiting exit fees
Article by MozoExit fees can be a nagging issue for anyone who has ever considered switching home loans – just another barrier on top of all the time and stress.
But many people don’t know the full story – what they are, how they are charged, how they can be avoided – so we thought it was a good time to take the mystery out of exit fees.
Basically, exit or discharge fees exist to discourage lender switching, and to cover the admin costs of closing a loan. Most mortgage lenders will also charge a deferred establishment fee if you switch in the first years of the loan.
Some exit fees reflect the value of the loan, whilst others are just flat fees based on the year you exit the loan. Better yet, some lenders have ditched exit fees altogether!
Recently ASIC have been battling the banks, claiming that the exit fees they charge are grossly inflated and do not reflect the real costs of loan termination. In a big win for borrowers, new consumer protection laws now allow people to dispute unfair exit fees.
So should exit fees really affect your decision to change lenders?
No. Not really. Even the worst exit fees of the Big Four banks standard variable loans – Westpac – will not be enough to dent potential savings from switching loans. Here are the numbers:
* Take a $300,000 ‘Rocket Repay’ home loan with Westpac * If you ditch the loan in year 1, 2, 3 or 4, you’ll be hit with $1,075 in exit costs * Using our Health Check, switching loans could save you up to $71,072 over the life of the loan * Therefore, overall saving is almost $70,000
So what’s the take away? It’s a really good idea to get in the habit of doing an annual check of your home loan. As always, we’ve made this super easy. Give our Home Loan Health Check a try now!