Switch Your Loan with NO service fee!
An exit fee is an amount of money you pay to your current lender if a borrower decides to switch their loan to another lender. It usually exists in your contract when you first take out a loan as a measure to penalise you for taking your business elsewhere. In addition to home loans, an exit fee could also apply in the cases of other loans including but not limited to car loans, student loans and personal loans.
The ironic fact is that most borrowers only discover of the existence of such a fee when it actually becomes applicable in their own case. In other words you would only hear about the exit fee, when you proceed to switching your loan to another provider.
In Australia, exit fees on home mortgages could often be as high as $7000. Few would disagree that an amount this large was a major disincentive for borrowers to start considering switching their loan. After all the whole reason why a borrower would want to switch a loan is to save money and by having to pay an exit fee, they are basically being asked to spend a large sum at once instead of being encouraged to save.
But fortunately from the borrower’s perspective, on 1st July 2011 the Federal Government of the time made legislative changes in the Commonwealth Parliament to abolish this exit fee. This measure was pursued to encourage competition between lenders. As a result, new borrowers may now be able to find a way out of their current home loan and switch to another lender if they are getting a better deal at no extra cost. This however may not apply to fixed rate loans. If you have a fixed rate loan, it may depend on how long you have remaining in your fixed rate term, to what the exit fees would be if any, it’s always good to double and triple check with your lender about the costs of getting out of a fixed rate loan.
Although if one took out a loan prior to 1st July 2011, it would be well worth their while checking with the bank whether the exit fee can still come into play due to the fact that it would have been in your paper work from the beginning that you would incur a fee if you tried to leave.
The safest way of going about it is by asking your current lender about the costs associated with paying your mortage off earlier than agreed, what sort of timeframe this applies to, and whether you will have all your imposed penalties outlined in writing.
As for new loans taken out after the abolition of the exit fee on 1st July 2011, it is illegal for your lender to charge you such a fee. This serves as a great incentive for exploring limitless new opportunities. Check out our RateContender at SwitchMyLoan.com.au so we help you make the most of no exit fees, today!
Call 1300 307 155 and start saving today!
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