What it costs to refinance your home loan

While refinancing your home loan can be a great way to lower your repayments or get features you don’t have now, it’s important to keep in mind that there are various costs and fees associated with refinancing a home loan. Of course, what you will need to pay will be dependent on the lender you are refinancing your home loan with. If you’re sticking with the same lender for example, there are typically less fees incurred compared to if you went to a completely new lender (i.e. an external refinance). If you do decide to go with external refinance, make sure you do your research as each lender charges differently.

To give you a rough idea of what costs you might be up for when refinancing, on average staying with the same lender will cost you roughly between $280 and $2,630. While refinancing your home loan with a new lender will cost anywhere from $790 to $2,960.

A breakdown of the costs to refinance a home loan:

Types of refinance

Internal refinance: when you’re refinancing your home loan with the same lender.

External refinance: when you’re refinancing your home loan with a different lender to the one that your home loan is currently with.

Closing the old loan

1. Discharge fee

A discharge fee is what your current lender charges you to pay out your current loan and for preparing the required documentation to do this. If you are refinancing with the same lender, it is unlikely you will need to pay this fee, but it’s important to check as each lender is different.  

2. Deregistration fee

When you get a home loan, your new lender needs to register your mortgage with the government, and concurrently, your current lender needs to deregister your existing mortgage. The government charges you a fee in order to do this and the amount varies from state to state. As with a discharge fee, it is unlikely that your lender would charge you this fee if you are internally refinancing, but again, it depends on the lender so it’s wise to check.

3. Break costs (if you’ve got a fixed rate)

You’ll need to pay a break cost if you have a fixed rate home loan and want to refinance before the fixed term ends. The formula to work this out is very complicated and the cost varies depending on lots of factors (e.g. your loan amount and interest rate), so it’s best to check with your lender. Typically, break costs are significant, so you should ask your current lender for an estimate of the costs before you decide to go ahead.

4. Switching costs (if you’re sticking with the same lender)

You’ll only need to pay a switching fee if you’re doing an internal refinance. It’s a fee your bank charges for closing off your old loan and opening a new one for a different product and covers the internal administration and handling costs. Each lender charges differently for this fee, so you’ll need to check with your lender to get an exact cost.

Costs associated with opening the new loan

Government fees

1. Registration fee

All mortgages must be registered with the government, and the government charges you a fee to do this. Different states charge different amounts, but you’ll be looking around the $120 to $200 mark for this fee.

2. Title search fee

When you apply for a home loan, a title search is performed in order to get the legal details of the property you are taking out the loan for. It is necessary in order to discover any hidden concerns about the property (e.g. encumbrances, caveats) that need to be resolved.

3. Priority Notice fee

Priority Notices are lodged with the Land Registry and are used to give notice to the rest of the world about pending transactions that will affect the title of a property. A Priority Notice  protects by preventing anyone else from registering an interest in a  property. In NSW, QLD, and VIC you are required to lodge a Priority Notice when refinancing a home loan.

Third party fees

1. Settlement fee

This is a fee you pay to your settlement agent or conveyancing lawyer (on top of any other fees they charge) for their services. At Qantas Money Home Loans, we use a digital conveyancer who charge lower settlement fees for online settlements, but we also offer non-digital settlements if you would prefer.

Lender fees

1. Application fee

This fee is associated with opening a new loan. When you refinance a loan you are closing your old loan and applying for a new one (either with the same lender or with a new one), which means you may need to pay an application fee. The cost of an application fee varies depending on the lender (anywhere from $150 to $700), while Qantas Money Home Loans charges an application and processing fee of $495.

2. Property valuation fee

Property valuation fees cover the lender’s cost of obtaining an up to date valuation of your property. Your new lender will require an updated valuation in order to determine your loan-to-value ratio (LVR) which in turn determines whether Lenders’ Mortgage Insurance (LMI) is necessary. If your new LVR is higher than 80% of the property’s value, you will need to pay LMI. With Qantas Money Home Loans however, we get a new valuation done for your property, but we don’t charge you a fee for it.

3. Preparation of mortgage docs

Your mortgage documents are a really important part of your home loan. They detail all the information about your property, your loan and your repayments. It’s the contract you’re entering into with your lender. At Qantas Money Home Loans, the costs for preparing this documentation is incorporated into the application fee we charge - so there is no additional fee for this.

4. Ongoing fees

These are the ongoing costs that come after you’ve settled your new home loan. They can include things like a monthly servicing fee, redraw costs, annual fees, and extra repayment charges. All these fees can affect the home loan’s comparison rate, so if you see an interest rate with a much higher comparison rate, you can assume that there will be some ongoing fees attached to it. Refinancing can help you potentially save by ditching some of these fees if your new lender doesn’t charge them, but you could also end up with new ones that you didn’t have with your previous loan, so make sure you research your new lender’s fees before you apply. For example, Qantas Money Home Loans doesn’t charge ongoing fees (we do charge $10 per month for offset accounts, but this is an optional extra for your loan).

How to know if it's the right time to refinance an existing loan?

As each lender charges differently, what you pay to refinance your loan will depend on who you decide to refinance with and who you currently have your loan with. While the upfront cost can be substantial, the savings you get by refinancing to a lower rate can significantly exceed this cost over time. 

It’s also important to make sure your home loan is meeting all your needs. Your circumstances change over time and the home loan you got when you bought your home may not be the right one for you anymore – so it pays to check.

Need any help?

Our Qantas Money Home Loans experts are here to help answer any questions you may have or you can use our refinance calculator here. You’re under no obligation to apply, we just want to help you find the home loan that’s right for you.

* You have to be a Qantas Frequent Flyer member to apply with Qantas Money Home Loans. This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.