How much does refinancing cost in Australia?

Costs to include

Ask both lenders for written estimates rather than relying on a single headline fee. Common costs include:

• Discharge or termination fee from the current lender.
• Application, settlement and valuation fees for the new loan.
• Government mortgage discharge and registration charges.
• Fixed-rate break costs, if applicable.
• Lender's mortgage insurance when the new LVR is high.

Work out the net cost

Subtract any genuine fee waiver or cashback from the total, but do not let an incentive drive the decision. Compare the new loan's rate, ongoing fees, features and remaining term. A no-fee refinance can still cost more over time if the product is unsuitable.

Fees from the current and new lender

Your existing lender may charge a discharge or settlement administration fee. The new lender may charge application, valuation, legal, settlement or package fees. Government charges can apply when one mortgage is discharged and another is registered. Ask for a written fee schedule from both sides. Online estimates are useful for planning, but the final amount can depend on the state, security, number of loan accounts and whether extra legal work is required.

The two costs that can change everything

A fixed-rate break cost can be substantial because it reflects the lender's loss when a fixed agreement ends early. It can also be zero, so obtain a current quote instead of guessing. Lender's mortgage insurance can arise when the new loan has a high LVR, even if you paid LMI when purchasing. The earlier premium normally does not transfer to the new lender. A valuation below expectations can therefore materially change the refinancing calculation.

How to treat cashback and fee waivers

A cashback can reduce the upfront cost, but it should be included only after checking its conditions and payment timing. Compare the loan without the incentive first. Then add the incentive as a separate benefit. This makes it easier to see whether the underlying loan remains competitive after the first year. Also check whether refinancing again within a specified period could require repayment of a broker fee or another disclosed cost under your agreement.

Questions to ask before you proceed

• What is the net saving after every discharge, application, valuation and ongoing fee?
• How long is the break-even period if the remaining loan term stays the same?
• Which valuation, income or policy issue could still change the approval or pricing?

Official guidance: Moneysmart: Switching home loans

This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.

Related questions

• When is refinancing actually worth it?
• Should I refinance or ask my bank for a lower rate?
• How often can you refinance a home loan?