The Banking Ombudsman recommends customers investigate the full costs of switching home loans before changing banks.
In one recent case, a customer was offered $3000 as an incentive to accept a home loan on the condition that he stayed with the bank for two years. Five weeks later he decided to change bank and was surprised that he would have to repay the $3000 incentive and a $100 admin fee. Mr J complained to us but we could not find that the bank had done anything wrong.
Another customer faced a similar issue. He accepted $4000 as an incentive with the same two-year term. Six months later, he sold his property and repaid his loan. The bank requested the $4000 back, plus a $7000 early repayment charge.
“If you are considering moving banks, take some time and do your homework”, says Banking Ombudsman, Nicola Sladden. “If you have accepted a cash incentive, the bank will often ask you to pay that back if you decide to move banks.“
A bank may lose money when a fixed rate loan is repaid early, and is usually entitled to recover that loss. The responsibility for early repayment charges will be set out in the standard terms and conditions.
It pays to research your obligations and all the potential costs before moving your home loan.