As a public servant, you've likely heard colleagues discussing refinancing their home loans, especially when their fixed rate period ending approaches or when they want to access a lower interest rate. While refinancing can offer significant benefits, understanding the application fees involved is crucial for making an informed decision.
What Are Refinancing Application Fees?
Refinancing application fees are charges that lenders impose when you apply to switch your mortgage from one lender to another. These fees can vary significantly across different banks and lenders across Australia, typically ranging from $300 to $800, though some lenders may charge more.
The application fee covers the lender's administrative costs for processing your refinancing request, including:
• Credit checks and assessment of your financial situation
• Property valuation
• Documentation processing
• Legal and administrative work
Breaking Down the Costs
When considering refinancing, it's important to understand that application fees are just one component of the total refinancing costs. Other expenses may include:
• Discharge fees from your current lender (usually $150-$400)
• Settlement fees (around $300-$600)
• Valuation fees (typically $200-$500)
• Legal fees if required
• Lenders mortgage insurance (if your loan amount exceeds 80% of property value)
When Application Fees Make Sense
Despite these costs, refinancing can still be financially beneficial in several scenarios:
Accessing Lower Interest Rates: If you can secure a variable interest rate or fixed interest rate that's significantly lower than your current rate, the long-term savings often outweigh the upfront application fees.
Releasing Equity in Your Property: Many public servants choose to release equity to buy the next property or fund major renovations. The application process allows you to access this equity while potentially securing more favourable loan terms.
Debt Consolidation: If you're looking to consolidate debts into your mortgage, the application fee becomes part of a broader financial strategy that could reduce loan repayments overall.
Changing Loan Terms: Whether you want to change your loan term to pay off your mortgage sooner or extend it to reduce monthly payments, refinancing gives you this flexibility.
How Finance & Mortgage Brokers Can Help
Working with experienced finance & mortgage brokers like Public Home Loans can help you access loan options from banks and lenders across Australia while understanding the true cost of refinancing. We can:
• Compare application fees across multiple lenders
• Check eligibility for special lender policies available to public servants
• Provide a streamlined application process
• Help you understand whether the benefits outweigh the costs
Calculating Your Break-Even Point
Before proceeding with refinancing, calculate how long it will take for your interest rate savings to offset the application fees and other costs. For example, if refinancing costs you $2,000 in total fees but saves you $200 per month in repayments, you'll break even after 10 months.
Preparing Your Application
To minimise delays and potential additional costs, ensure you have all necessary documentation ready:
• Recent bank statements (usually last three months)
• Pay slips and employment verification
• Current loan statements
• Property documents
• Details of your current financial situation
Making the Right Choice
As a public servant, you may have access to better loan options through certain lenders who recognise the job security that comes with public service employment. These special policies might include reduced application fees or waived costs entirely.
Remember, the lowest application fee doesn't always mean the most cost-effective option. Consider the ongoing interest rate, loan features, and total cost over the life of the loan when making your decision.
Refinancing can provide significant long-term benefits, from accessing lower rates to releasing equity for your next investment. While application fees are a reality of the refinancing process, they shouldn't deter you from exploring options that could improve your financial position.
Call one of our team or book an appointment at a time that works for you to discuss your refinancing options and understand how application fees fit into your overall financial strategy.
