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Everything you Need to Know about Exit Costs when Refinancing

Exit Costs when Refinancing

Here at Astute St Leonards, we have just completed a refinance for a client where we moved two fixed rate loans into a cheaper package. This raised the issues of exit costs and break fees because refinancing can be a great way to save money if you believe you are paying too much for your loan. However, there is more to it than just finding a loan with a lower interest rate and making the change. Before making the switch, ensure the savings you could make outweigh the fees involved. Here are the different exit costs to consider when refinancing:

Exit Fee

Although loans taken out after 1st July 2011 are not subject to deferred establishment, known as “exit” fees, those taken out prior may still be subjected to this fee. Also known as “early termination” or “early discharge” fees, they can sometimes be paid by your new lender but are normally applied to an early contract exit. We will assess whether your loan has exit fees applied or not.

Establishment Fee

Also known as “application“, “up-front” or “set-up” fees, these cover the lender’s cost of preparing the necessary documents for your new home loan. They are payable on most new loans, and the alternative to not paying this particular fee is being charged higher ongoing fees or even a higher rate for the life of the loan.

Mortgage Discharge Fee

Covering your early legal release from all mortgage obligations, this fee is not to be confused with an exit fee. Also known as a “settlement” or “termination” fee, its purpose is to compensate your lender for the revenue it may lose due to the contract break.

Lender’s Mortgage Insurance (LMI)

This non-transferrable premium means that if you hold less than 20 per cent equity at the time of your refinance, you may have to pay LMI even if you paid it on the original loan. Extra care is also needed here because, whether or not you hold 20% of the original valuation of the property, you may not if the property’s value has decreased and while LMI may not have been a consideration at all in the original loan, it may be payable on the refinance.

Stamp Duty

If your purpose for making the switch is to increase your loan amount – maybe to fund renovations – then stamp duty will apply only to the difference between the original loan amount and the refinanced loan amount. Different rules apply in different States, so it’s worth speaking with us to see if this charge applies.

Other Government Charges

Fees are applied for the registration and deregistration of a mortgage so that all claims on a property can be checked by any future buyers. Varying from State to State, these can potentially add up to $1,000 or more, so it is important to review the whole package before making the decision to refinance.

Break Fee

If you were on a fixed rate loan, your lender is likely to charge you a fee for ‘breaking’ out of the loan term. This fee varies depending on the amount owed, the interest rate you were locked into, the current interest rate and the duration of your loan. Each lender will have an algorithm to define this fee and it may not be easily defined without help.

In Summary

Although some of these fees can be negotiated by a broker, the total cost can be substantial. At Astute St Leonards, we can ensure that refinancing will help you achieve your goals while maintaining your capacity to service the debt. We will ensure you are only paying the relevant fees for your unique circumstance.

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Get Your Finance Broker Working for You!

Madison Wells Pty Ltd, trading as Astute St Leonards, has created a series of short videos to highlight how and why to use a finance broker for your home loans, cars loans or even a musical instrument or another asset! This video will show you how to get your finance broker working for you, especially if you are refinancing an expensive loan to a lower rate.

You can watch the other videos in the series here:
5 Great Reasons to use a Finance Broker
What to look for when Choosing a Broker
5 Key Ways a Finance Broker can help you

For more information and a free quote on any loan please give us a call on 02 8912 2139 or contact us through our Astute St Leonards page and you can get your finance broker working for you – i.e. us!

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A Buyer’s Agent Will Help you Purchase a New Home

aerial overview of port jackson

Buying a house, whether it is your first time, or something you have done several times in the past, is always a stressful period in anyone’s life. A buyer’s agent will help you purchase a new home and take the stress out of the process – especially if they have a network of professional services behind them to sort out all the niggling problems that arise.

A buyer’s agent is a licensed professional that will do the hard work on your behalf – the searching, evaluating and negotiating during the purchase. The key is that the Buyer’s Agent is on your side whereas a Real Estate Agent is focused on getting the best result for the seller, so in some cases they are caught in the middle wanting to help both sides of the transaction. Clearly the money will come from the seller, so the Real Estate Agent will always swing towards the sale, not the purchase!

Why use a Buyer’s Agent?

1st question: Who should use a buyer’s agent? Well, the answer is everyone!

Think about the process of buying and moving home, firstly, once you have decided on the area to live in, you need to start looking and figuring out the market and where your preferred facilities are, e.g. schools, churches, public transportation etc. All this takes time and effort, which you may need to cram into evenings and weekends thus reducing your downtime and costing money to travel to look at properties.

When you have found the property you want, you then need to start negotationg with the Real Estate Agent to get the price you want – or you have to get into the melee at an auction! Time is a big issue, especially if you have a family to raise and have commitments around their school and sports activities.

2nd question: Why should I use a buyer’s agent?

Clearly the first reason is that it will reduce the amount of time you spend doing all that research. Many buyer’s agents specialise in a handful of closely connected suburbs and they already know what is there and where the best streets are located. They have the local knowledge and can guide you through the whole process.

Buyer’s agents can also get access to the off-market properties, can get more accurate valuations and can access the latest market data, giving you the advice quickly – something that would take months to collated on your own.

Importantly, the network supporting the buyer’s agent can bring independant professionals to the process so that you are always getting accurate information and a quality service.

Jain & Co

Astute St Leonards recognises the value and power of using a buyer’s agent and we have partnered with Jain & Co to help our customers find their dream home. The Principal, Adil Jain, is focused on finding the best property for you, sifting through the clutter and acting as your representative at the auction or negotating the best price.

If you are looking to buy a property on the Lower North Shore (Mosman, Cremorne, Neutral Bay, Willoughby, Castlecrag, Middle Cove, Artarmon, Cammeray, Northbridge, Chatswood, North Sydney), the Northern Beaches (Manly, Freshwater, Balgowlah, Manly Vale, Dee Why, Brookvale, Avalon, Palm Beach, Collaroy) or even Sydney CBD and the Inner West, then give Adil a call on 0415 234 656.

A buyer’s agent will help you purchase a new home, so give Astute St Leonards a call to get a matching loan to help Adil buy your next home!

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5 Key Ways a Finance Broker Can Help You

This video is #3 in a short series of videos highlighting 5 key ways a finance broker can help you save time and sometimes money by finding a range of loans that you can choose from. Remember, when looking for a home loan, don’t let your Bank tell you what to do – this is a major decision and therefore you need as much information as possible.

Watch the first two videos here:
#1: 5 Great reasons to use a finance broker

#2: What to look when choosing a broker

Learn more about Astute St Leonards here or go to our Facebook page here. We hope you enjoy these 5 key ways a finance broker can help you and would be happy to have an initial discussion on your requirements.

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Make Your Meeting with a Broker a Productive One

If you’re looking for a home loan but are inexperienced with finance brokers, attending your first meeting with a broker like Astute St Leonards can be a nervous experience. Getting a home loan, after all, can be quite complex for anyone let alone a first-timer. There are lots of brokers like Astute St Leonards and there is a lot to learn. However there are many steps you can take to be confident that your appointment with us will be a success. Read on to see how you can make your meeting with a broker a productive one!

A good starting point is to familiarise yourself with the expectations of the first appointment between a broker and yourself. We will ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take lets you participate more actively in the conversation. This means you can better articulate your needs to us and ultimately make the right decision for your requirements.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask us. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information. Astute St Leonards will always document the answers in an email, so that you have a record of the information.

It is common industry practice, too, for a broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions.  To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

Research, Research, Research – do your homework!

The other preparation you can do to make your meeting with a broker a productive one, is to research your broker – check us out and make sure we align with you. Read more of our content on our web site and see us on social media either as Astute St Leonards or our parent company Madison Wells Pty Ltd. This can give you a good indication of our knowledge and expertise and highlight topics you can discuss with us. You can also determine if we specialise in any types of loans that match your needs, where we are located and our panel of lenders – 17 and counting! Finally, you should investigate their qualifications and the brokerage that supports them.

Brokers should also be accredited because we are held to higher standards. By verifying they are accredited, you can approach the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.

We are here to not only be your finance broker, but also a partner in helping you to plan your future asset purchases. To that end, we would be happy to collaborate with your accountant or financial planner so that we are all working as a team for you. Our view is that you should be in cotrol, after all you are the decision-maker, so it is important that you make your meeting with a broker a productive one.

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5 Great Reasons to Use a Broker

We recently created a series of four simple videos to explain the benefits of using a financial broker. If you haven’t seen it on our Youtube channel (with nearly 10,000 views) then have a look at the first edition here. In this video, I give 5 great reasons to use a broker when looking for a home loan or any financial loan.

Over the next month, we’ll show the other videos in the series! In the meantime have a look at our Astute St Leonards page to see the breadth of services we offer:

  • Home loans and mortgages.
  • Refinancing existing loans to a lower rate.
  • Finance for renovations.
  • Construction loans.
  • New and used car loans.
  • Car restorations.
  • Musical instrument purchases (talk to use about our preferred partners).

We are your local resource for all things finance, so start by learning the 5 great reasons to use a broker like Astute St Leonards.

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Don’t Forget the Extra Costs of Buying a Home!

When taking out a mortgage, don’t forget the extra costs of buying a home – consider the associated fees and expenses that you will incur. Here are some of the extra costs that you’ll need to consider when you get a home loan:

Home Loan Application Fees

Most lenders charge a home loan application fee. This can range from loan to loan, and covers:

  • Loan contracts
  • Property title checks
  • Credit checks
  • Attending a settlement
Mortgage Fees and Costs
  • Mortgage establishment fees – Lenders generally charge a mortgage establishment fee – a fee for setting up a mortgage.
  • Property valuation – A third party – chosen by the lender – is appointed to determine the value of your land and improvements.
  • Mortgage registration – Your mortgage deeds need to be registered with the Government.
  • Mortgage stamp duty – Some State Governments charges stamp duty to register your mortgage.
  • Lenders mortgage insurance – If you don’t have 20% of the purchase price or the value of the property, the lender will require you to pay  for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments.
Property Fees and Costs
  • Building, Pest and Electrical Inspection fees – It’s wise to have your new property inspected for any structural or electrical problems and for pests (e.g. termites).
  • Stamp Duty – Governments charge Stamp Duty to transfer the ownership of a property.
  • Registration of Transfer Fee – The new owner of the property must be registered at the Land Titles Office.
  • Legal fees – You generally need to pay a Solicitor of Settlement Agent to handle the transfer of ownership of the property on your behalf
  • Home & contents insurance – Most homeowners insure their home and contents against a range of threats: burglary, fire, storm, etc. Lenders will insist that your property is insured while you have a mortgage.
  • Life and income protection insurance – Borrowers should consider protecting their incomes and themselves while they have a mortgage.
  • Utility costs – Connecting electricity, gas and telephone can attract a fee.
  • Council Rates – Your local council charges rates to cover garbage collection and a host of other services.
  • Water Rates – The water corporation charges rates for the supply and upkeep of water to your property.
  • Body corporate fees – If you buy an apartment or Strata Titled property, body corporate fees will be charged. Some buildings can have very high feed – particularly if the building is in need of a major work (e.g. concrete cancer, security upgrade, new hot water system, etc) or if there are lifts, pools and other communal facilities. This should be a key question to ask before agreeing to buy an apartment.
  • Maintenance costs – Don’t forget to make provision for regular maintenance on your home – even if you decide not to undertake significant renovation.

There is a lot to consider when you are ready to buy a new home – especially if this is the first time you have bought a home in Australia. Our advice is to talk through these when you are reviewing the options for your home loan – in some cases it may help your loan application if you have a plan to cover the ongoing costs of ownership.

Make sure that you don’t forget these extra costs when buying a new home – talk to us at Madison Wells Pty Ltd t/a Astute St Leonards to help with your planning! We are here to help you through the process.

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Five Ways to Finance a Home Renovation

Considering transforming your home from ‘banal’ to ‘brilliant’, but lack the funds to support your makeover? Never fear, Astute St Leonards have rounded up five home renovation finance options that could help turn your dream into reality.

1. Equity Release / Top Up Home Loan

This is probably the most common way home owners borrow money when they want to get renovation finance. It involves borrowing against the current value of your home, before any value-adding renovations and in most cases allows you to obtain the funds upfront. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available. If you run out of funds mid-construction – and if the property is then not in sound, lock up condition – you may have an issue obtaining extra funds down the track.

2. Construction Loan

If you’re planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the end value of your home and take advantage of mortgage rates which tend to be lower than credit card and personal loan rates. With a construction loan, the lender will assess the value of your home after the renovation based on the building plans and you can typically borrow against that value.  You won’t be given the full loan amount upfront, but usually in staggered amounts over a period of time – this is called ‘progress payments’ and is linked to a fixed price building contract which will be from your builder.

3. Line of Credit

When you apply, you can establish a revolving credit line that you can access whenever you want to – up to your approved limit. You only pay interest on the funds you use and as you pay off your balance, you can re-borrow the unused funds without reapplying if that becomes necessary.  However, care must be taken not to get in over your head in terms of serviceability. Make sure you can make repayments on the line of credit that will reduce the principal because your minimum repayment only pays the interest, it will not reduce the loan. Rates on this product are typically much higher than a construction loan or top up loan. This product feature is great if managed well, but can also be a trap if not seriously considered as your limit will never change.

4. Personal Loan

If you’re only making minor renovations – personal loans are usually capped at around $30,000 to $50,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans and payments need to be made usually over a maximum of seven years.

5. Credit Cards

This option should only be considered if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project, that extra interest might actually total less than loan establishment fees.

*HomeBuilder

If you’re looking for further assistance to be able to afford your property renovation project, the Federal Government recently announced $25,000 grants for eligible Australian owner-occupiers to build a new home or substantially renovate an existing home. The Government’s HomeBuilder package for home renovation finance is designed to assist the residential construction market by encouraging the commencement of new home builds and renovations. Income and other conditions apply and this grants program has been expended to 31 March 2021. For more information visit the Treasury website.

One thing you must do

There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price.

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Finance Support for Business and Personal Use

Madison Wells Pty Ltd is pleased to announce two new partnerships to help our customers in this time of economic uncertainty. Cash flow is a critical aspect to the success of any business or even personal finances. Balancing the flow is key to financial success and is the foundation of our Revenue and Cost Management services. We are now able to provide finance support for business and personal use.

Astute Financial St Leonards

Madison Wells has partnered with the Astute Financial Group to offer finance, insurance and wealth services. Primarily geared to the residential, investment and vehicle market, Astute St Leonards can now provide a range of products and services to help our customers with their future finance planning.

Astute Financial has been in operation since 2000 and has had a relationship with the founders of Madison Wells since that time. We felt that it was only natural to offer their products to our own customers considering the help they have provided to us over the last twenty years. Astute Financial was one of the first businesses to offer a fully integrated financial services business model that offers their customers access to specialists in finance, insurance and wealth services.

Finport

Madison Wells recognises that many of our customers require help with their cash flows when importing product for resale. Our partnership with Finport enables us to help with the management of costs with the gap between purchasing and resale. Finport are a leader in trade finance smoothing out the cash flows between ordering products and the later sale. Unique to this market, Finport also manage the freight forwarding, reducing the risk further for companies who have regular imports. Importantly, this also applies to shipping interstate.

Importing products needs cash flow management - Madison Wells provides finance support for business and personal use.
Importation and logistics are key to business success

This diversification through new partnerships provides simple, straightforward solutions. Every stage of your financial journey is important and Madison Wells will keep all your finance needs managed properly. Talk to Madison Wells today about how we can help provide finance support for business and personal use!