Borrowers probably too frightened of fees to switch: Finder.com.au

Break costs, discharge fees and set up costs for a new loan were the most common concerns listed in more than 7,000 questions posed to finder.com.au, according to spokesperson Michelle Hutchinson.

After these concerns taxes, including stamp duty, were listed most commonly, with almost a question each day about capital gains tax over the past few months.

Hutchison said that borrowers expect to be stung by hidden fees and taxes, which discourages them from switching home loans.

She said that it shows many borrowers are too frightened about being ‘stung’ by fees and taxes to consider switching.

"This is despite the fact that it’s relatively cheaper to switch home loans for most borrowers compared to two years ago,” said Hutchison.

"And even though taxes are one of life's certainties, it's still one of the most confusing topics for many borrowers. For instance, many borrowers don't know how to calculate stamp duty costs for a new mortgage, which can easily be found using an online calculator. Another surprising concern was the vast number of enquiries about capital gains tax for owner-occupied mortgages - this only applies to investment properties."

Refinancing was the third most common concern, with borrowers asking about the process and the costs.

Borrowers should noted that since July 2011, lenders have been banned from charging borrowers exit fees on variable home loans entered into after this date.

Hutchison notes that buyers can expect to pay around $1,000 to close their loan and establish a new one.

“It’s really worth asking questions and working out the costs of switching your home loan. Even if you can get a quarter of a percent discount off your current loan, it could mean big savings,” she said.

“However, it may not be worth refinancing if you have less than 20 percent equity as you will incur Lenders Mortgage Insurance (LMI) again which may outweigh the benefit of switching.”