What Costs Are Involved in Refinancing a Home Loan?
Refinancing can save you money, but it's important to factor in the discharge, application, and government fees involved.
Refinancing a home loan generally involves costs to exit your current lender and set up the new loan. These typically include a discharge fee, a new application fee, and government registration fees, which usually total between $500 and $1,000.
How refinancing costs work
When you move your loan, your current lender will charge a discharge fee to release the mortgage title. Your new lender may charge an application or settlement fee (though these are often waived). Finally, the state government charges fees to deregister the old mortgage and register the new one on your property title.
Illustrative example
Illustrative example: You decide to refinance for a lower interest rate. Your current lender charges a $350 discharge fee. Your new lender waives their application fee but charges a $200 settlement fee. The government mortgage registration fees total $300. Your total cost to switch is $850. If the new lower rate saves you $150 a month in interest, you will break even on these costs in about six months.
What may change the outcome
If you are currently on a fixed-rate loan, breaking that contract early to refinance can trigger significant "break costs," which can amount to thousands of dollars. Additionally, if your property has decreased in value and your equity is now below 20%, you might have to pay Lenders Mortgage Insurance (LMI) again to refinance.
Common misunderstandings
Many borrowers think refinancing requires them to pay out-of-pocket cash for the fees. In most cases, these fees can simply be added to the new loan balance so you don't need upfront cash to switch.
When a personal review may help
A broker can calculate your exact switching costs and compare them against the projected interest savings to ensure refinancing leaves you genuinely better off.
Next step
Run your numbers through our Refinance Calculator to see your potential savings and estimated break-even point.
This article provides general information only and does not take into account your objectives, financial situation or needs. It does not constitute personal credit, financial, tax or legal advice. Lending outcomes depend on individual circumstances, lender policy and assessment.
Have questions about your situation?
Every home loan scenario is unique. Speak directly with Cameron or Matthew to get clear answers.