Understanding Home Loan Fees And Exit Charges

This is not a simple process without a cost associated

, and these fees are generally known as exit charges. Within the capsule of exit charges, there are a slew of various fees that one must pay when these contracts are broken.

Shopping Around for a Home Loan Deal

If you are not happy about your current loan situation, the first thing you should do is shop around for a new home loan deal. There are dozens out there, so finding different options to compare is crucial in order to find the best rate.

Since home loan fees and exit charges will be factoring into the switch, you will have to calculate whether switching home loans will still give you a great deal regardless of the additional fees. Selecting the wrong home loan could be extremely costly and set you back from your original payment date.

Types of Home Loan Fees

By switching home loans, you will have to pay different types of home loan fees. While breaking the loan contract, you will have to pay exit fees outlined by the current home lender. Depending on the contract, the fees may vary, so it is important to triple check your home loan contract.

Common fees that you will see and probably have to pay for when switching loans is a 'switching fee', an 'early termination fee', an 'early discharge fee' and a 'deferred start up fee'. The amount you pay in fees can vary from very little to thousands.

Exit fees contain two different types of charges - an early termination fee and 'other' fees. Early termination fees are not always charged because they are meant for people who break the contract within five years or so of taking out the loan.

The 'other' fees are usually those that are charged which may include an administration fee, a discharge fee or other fees that pertain to terminating the original home loan. These loan fees can be tricky as the interest rates may be locked in at one rate when you negotiate your loan, and by the time you switch loans, the average rate may be lower, meaning you will have to pay a break or variance fee. A break fee is what you owe to the bank if you are paying out a fixed interest rate loan before the fixed term has matured.

If you are ever in doubt, then you should ask your lender or a finance consultant about the fees that you will be incurring by terminating loans early and switching them across to a new mortgage.

by: Elizabeth Mclean

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