Fees and Stamp Duty of Refinancing
Refinancing your home loan can be a great way to save money on your monthly payments or get a better interest rate. However, before you do it, it’s important to understand the fees and stamp duty involved. These costs can add up, so it’s important to factor them into your decision.
In this article, we’ll take a look at the different fees and stamp duty you may have to pay when refinancing your home loan. We’ll also provide some tips on how to save money on these costs.
Cost of Refinancing a Home Loan in Australia
The cost of refinancing your home loan in Australia can vary depending on several factors. These fees can vary depending on the lender, the type of loan you’re getting, and your individual circumstances.
What are the Fees Involved in Refinancing?
Some of the most home loan refinancing costs include:
- Application fee: This is a fee charged by the lender to process your loan application.
- Loan discharge fee: This is a fee charged by your current lender to release you from your existing loan.
- Valuation fee: This is a fee charged by a licensed valuer to assess the value of your property.
- Mortgage registration fee: This is a fee charged by the government to register your new mortgage.
- Lenders mortgage insurance (LMI): If you have less than 20% equity in your property, you may have to pay LMI (lenders mortgage insurance). LMI is a type of insurance that protects the lender if you default on your loan.
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What is Stamp Duty?
Stamp duty is a tax that you may have to pay when you buy a property or refinance your home loan. The amount of stamp duty you pay depends on the value of your property and the state or territory in which you live.
Is Stamp Duty Included in Home Loan?
When taking out a home loan to purchase property, stamp duty is usually not included in the loan amount and must be paid upfront when the purchase is finalised. The stamp duty is calculated based on the purchase price paid for the property.
Can You Add Stamp Duty to a Mortgage?
No, you cannot add stamp duty to your mortgage loan. Stamp duty must be paid separately at the time of purchase using your own funds or separate financing.
However, some states and lenders may allow you to include stamp duty in the total home loan amount borrowed, essentially deferring payment, but this option is not always available.
Check with your lender to see if adding stamp duty to the mortgage is a possibility when purchasing the property and home loan.
Refinancing Stamp Duty Exemptions
In some cases, you may be exempt from paying stamp duty when you refinance your existing home loan. For example, you are often exempt if you are refinancing to a lower interest rate with the same lender or if you are simply adding or removing a name to the title of a property you already own.
However, if you are refinancing to withdraw equity from your home or to get extra funds for other purposes like home renovations, then you may still be liable for stamp duty payment on the additional loan amount. The rules around stamp duty exemptions for refinancing and loan increases vary by state, so it’s important to check the specific regulations where you live.
Do I Get a Foreigner Stamp Duty Charge?
Australian expats working overseas do not get a foreigner stamp duty. However, if you are considered a non-resident for tax purposes or if you are purchasing property in Australia with a non-resident spouse, then stamp duty charges may fully or partially apply. The specific rules and rates can vary between states and territories in Australia.
For example, in New South Wales (NSW), if you are an Australian citizen or permanent resident purchasing property with a foreign spouse, you may be eligible for a partial exemption from the foreign buyer surcharge.
However, the exemption is generally limited to the percentage of ownership held by the Australian citizen or permanent resident.
How to Save Money on Refinancing Fees
There are a few things you can do to save money on the fees involved in refinancing your home loan. Here are a few tips:
- Shop Around and Get Multiple Quotes: Take the time to research and compare offers from different lenders. This allows you to find the most competitive rates and fees available.
- Inquire About Discounts or Rebates: Some lenders may offer discounts or rebates on refinancing fees, especially if you meet certain criteria or have a strong credit history. Don’t hesitate to ask about any available incentives.
- Consider Refinancing with Your Current Lender: Check with your current lender to see if they offer any incentives or reduced fees for existing customers. They may be willing to negotiate terms to retain your business.
- Time Your Refinancing: Consider refinancing during the off-peak season when lenders may be more inclined to offer competitive rates or fee waivers to attract borrowers. Timing your refinancing strategically can help you secure better deals.
- Do Your Own Research: Take advantage of online resources and tools that can help you calculate and compare refinancing fees from different lenders. This empowers you to make informed decisions and potentially negotiate better terms.
How to Find the Lowest Refinance Home Loan Rates in Australia
When looking to refinance your home loan, shopping around for the lowest interest rates is key to saving money over the long run. Here are some tips to help find the most competitive refinance rates:
- Compare Fixed vs Variable Rate Options: Consider where rates are headed to pick the best route
- Research Both Major and Alternative Lenders: Smaller lenders sometimes offer better deals.
- Check Rate Comparison Sites: Check various rate comparison sites, but remember to always follow-up directly with lenders too.
- Negotiate with Your Current Lender: They may match or beat rates to retain your business.
- Get Personalised Quotes: Provide your scenario to potential lenders to get accurate quotes.
How Do I Know If Refinancing Is Right For Me?
There are a few factors to consider when deciding if refinancing is right for you. These factors include:
- Current Interest Rate: Compare your existing interest rate with current market rates. If market rates are significantly lower, refinancing to secure a lower interest rate can potentially save you money over the long term.
- Home Loan Refinancing Costs: Calculate the upfront costs associated with refinancing, including application fees, valuation fees, legal fees, and potential discharge fees. Consider whether the savings from refinancing outweigh these costs within a reasonable timeframe.
- Potential Savings: Estimate the potential savings you could achieve by refinancing. Calculate the difference in interest payments between your current loan and the proposed refinanced loan. Additionally, consider the impact of a shorter loan term or lower monthly payments on your financial goals.
- Financial Situation: Assess your current financial circumstances, including income stability, employment status, and creditworthiness. Lenders will evaluate these factors during the refinancing process. Ensure you meet the criteria for a favourable refinancing offer.
- Long-Term Plans: Consider your future plans for the property. If you plan to sell or move in the near future, refinancing may not provide sufficient time to recoup the costs. However, if you plan to stay in the property for an extended period, the potential savings from refinancing could be more substantial.
If you are paying a high interest rate on your home loan and you can refinance to a lower interest rate, refinancing could save you money.
However, if the cost of refinancing your home loan is too high or you are not likely to save enough money over the life of the loan, refinancing may not be the right decision for you.
Start Your Refinance Process Today
Refinancing your home loan presents an opportunity to save money, but it’s crucial to consider the fees and stamp duty associated with the process.
By conducting thorough research, obtaining quotes from multiple lenders, and comparing the terms and costs, you can maximise your savings and secure the best refinancing deal.
If you are still wondering whether refinancing is the right option for you, contact one of our expat mortgage brokers today to help answer your questions and get started on the refinancing process.
Get a free Australian mortgage assessment today.
Frequently Asked Questions
A discharge fee is charged by your current lender to release you from your existing loan. A mortgage registration fee is charged by the government to register your new mortgage.
The amount of stamp duty you pay depends on the value of your property and the state or territory in which you live. You can use the government’s stamp duty calculator to estimate how much you will owe.
In some cases, you may be exempt from paying stamp duty when you refinance your home loan. For example, you may be exempt if you are refinancing to a lower interest rate or if you are adding a name to the title of your property.
You can contact your state or territory’s revenue office to find out more about the exemptions that may be available to you.
There are a number of potential benefits to refinancing your home loan. These benefits can include:
- Lower interest rates: If you can refinance your home loan to a lower interest rate, you could save money on your monthly payments.
- Shorter term: If you refinance your home loan to a shorter term, you could pay off your loan sooner and save money on interest.
- More flexible features: Some lenders offer more flexible features with their home loans, such as the ability to make extra payments or switch to a variable rate. If these features are important to you, refinancing your home loan could give you access to them.
- Get a better deal: If you have a poor credit history or you are self-employed, you may have difficulty getting a home loan from a traditional lender. However, there are a number of non-bank lenders that specialise in providing home loans to borrowers with these types of circumstances. By refinancing with a non-bank lender, you could get a better deal on your home loan.
No, you can’t directly add stamp duty to your mortgage in Australia. However, you may have options to incorporate its cost, like borrowing more or using a higher loan-to-value ratio. This increases your loan amount and monthly payments, but it spreads the cost. Consider seeking professional advice to explore suitable options for your situation.