Let's talk about the fees associated with home loan refinancing

Refinancing your home loan can help you save money, but there are often different fees and costs that come with closing your old home loan and setting up a new mortgage. With this in mind, it can be helpful to know exactly what you’re up for before making the switch so you can do the math to make sure refinancing is the best option for you.

Let’s run through some of the fees you’ll have to pay when you refinance your mortgage.

Discharge fee

When you refinance your home loan, you’ll generally have to pay a discharge fee to your current lender to cover the cost of closing down your home loan. Discharge fees are set by the lenders themselves, so they tend to differ but you can generally expect them to set you back anywhere from $150 to $500.

Break fee

If you're on a fixed-rate mortgage and you decide to refinance before the end of your fixed-rate term, you’ll have to pay a break fee. These kinds of break costs are charged by your current lender to compensate them for any losses they incur as a result of you breaking the contract early. 

Each lender has their own formula for calculating break costs, which often takes into account:

• How much time you have left on your fixed term
• The outstanding loan balance
• The difference in interest rate

Application fee

Some lenders will charge you an application or establishment fee to cover the costs that come with setting up a new home loan. Application fees can cost up to $1,000, but some lenders might be willing to waive the application fee to attract you as a new customer. 

Valuation fee

If it’s been a few years since you first bought your property, you might have to complete an updated property valuation as part of the refinancing process. Most lenders will pass the cost of the valuation onto you as the borrower, otherwise it might be built into the application fee. Property valuations can cost anywhere from $100 to $600 depending on the extent of the assessment.

Government fees

You’ll also be up for government fees when refinancing. Each state and territory is responsible for setting its own mortgage registration fee. This fee covers the cost of updated the mortgage on your home with the land titles office in your state or territory.

Mortgage registration fees vary from state-to-state, so it’s worth consulting with your home state or territory’s Land Titles Office for the latest figures. 

In some cases, you might also have to pay stamp duty when refinancing your home loan. If you switch to a home loan with a larger balance than your current mortgage, you generally have to pay stamp duty on the difference between the two amounts. 

With that said, you might be able to avoid paying stamp duty if:

• The name of the borrower stays the same
• The loan amount remains the same or less, or
• If you refinance with the same lender

Settlement fee

This covers the cost of the accounting, legal and administrative fees that the bank incurs when setting up your new home loan and paying out your existing mortgage. Settlement fees range anywhere from $100 to $1,000.

Other costs to consider

The upfront costs of refinancing can be the difference between staying with your current lender or switching it up, but they’re not the only costs worth considering. Here are a few other expenses that you should build into your calculations before refinancing.

Lenders mortgage insurance (LMI)

Did you have to take out LMI when you first set up your home loan? If you’ve already forked out thousands in insurance, chances are you don’t want to have to pay a second round of LMI. So, before you refinance it’s worth figuring out how much equity you’ve built up in your property. 

If you’ve managed to build up more than 20% since you first took out your home loan, then you should be in the clear when it comes to LMI. If you’re still under that 20% mark it could be worth holding tight with your current loan until you build up enough equity to refinance without having to pay for LMI.

With that said, if you stand to make some serious savings by refinancing then you might feel that it’s worth paying LMI to secure a better home loan. At the end of the day, it’s up to you.  

Administration fees

Depending on the type of loan you end up refinancing too, some lenders will charge a monthly or annual administration fee on top of your mortgage repayments. Although it might not seem like much, these fees can add up over the life of your loan, so it’s worth thinking about these costs before making the switch. 

Mortgage repayments 

How do your new mortgage repayments stack up against your current loan repayments? Are you set to make some killer savings? You can use a repayment calculator to work out how much your new repayments are likely to cost you when you switch to Unloan.

Before you decide to make the switch, it’s important to weigh up the potential savings and benefits against the cost of refinancing a home loan. All in all, refinancing can cost you anywhere from a couple of hundred dollars to a couple of grand, so this can make a big difference to your figures. 

At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. That way you can enjoy a competitive interest rate and save money on your fees. Take a look at what it’s like to refinance with Unloan.

In certain circumstances you may be required to pay an LMI premium - learn more about why this is applied and how it works.

Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.