Exit fee free homeloans: are they worth it?

NAB has launched a home loan with no early-exit fees, in response to the federal government’s request to banks early this year. With NAB’s Clear Banking home loan it’s a potential saving of $900 compared with most other NAB loans which charge an early-exit fee if the loan is repaid within four years. Other lenders may charge higher exit fees.

The Clear Banking home loan is no-frills and, although it does allow additional repayments and offers redraw, there is no interest-only payment option or 100 percent offset. You can’t split the loan. Despite these limited features, you’ll pay NAB’s full standard variable rate of 9.61 percent pa with no possibility of a discount. Almost no one pays the full standard variable rate these days. According to Infochoice, 9.05 percent pa is the true indicator rate.

We crunched the numbers based on a $300,000 loan taken over a 25-year term. If you took out the Clear Home loan at 9.61 percent pa and repaid it in just under four years you would pay $110,551 interest. In comparison NAB’s base variable rate, which has a few more features than the Clear Banking loan, currently has a special rate of 8.9 percent pa for loans over $250,000.

If you repaid that loan in just under four years you would pay $8422 less interest. Even after the early-exit fee you’re still better off. There are loans without early exit fees. ASIC says only 46 percent of loans products from credit unions or building societies have an ETF. With large banks it’s 93.75%.

Money verdict

NAB’s Clear Home loan might pander to the government’s wishes but it doesn’t offer real value to consumers. You’re better off looking for a loan with a cheaper rate. And if you think you’ll pay out the loan early, a good rate and no exit fee will be even better.

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