5 costs to take into consideration when refinancing your mortgage

5 costs to take into consideration when refinancing your mortgage

Refinancing your home loan can be a great way to benefit from lower interest rates or to find a product that’s more suited to your current personal and financial situation. However, this process also comes with a few costs.

From application fees to ongoing expenses, these costs can quickly add up in the long run — and in some cases, they may outweigh the benefits.

So what is the true cost of refinancing your home? Read on to find out.

1. Lender discharge fee

The first cost you’ll need to take into account is the lender’s discharge fees. When you refinance, your new lender pays out your existing mortgage. However, there will also be a fee associated with discharging from your current lender before the loan term is complete.

The amount you pay depends on the lender and the type of home loan you have, but these typically range from $300 to $400. If you have a variable home loan, your discharge fee should be on the lower end of this scale. On the other hand, if you’re in the middle of a fixed-term loan, you may end up having to pay hundreds in break costs.

2. Loan application fees

You may remember that when you first took out your mortgage, you had to pay loan application fees. When you refinance your home loan, you’re taking out an entirely new home loan so you may need to pay these costs again. 

The cost of the loan application fee will depend on your lender, but can range anywhere from $150 to upwards of $700. There are instances where a lender may waive the application fees altogether when refinancing, so it pays to check this with your bank or mortgage broker.

3. Mortgage registration fee

Like the mortgage application fee, you’ll also need to pay another mortgage registration fee when you refinance your home loan. This is a fee charged by your state or territory government to register to remove your existing lender and register the new lender on the title. 

Mortgage registration fees vary depending on your state or government. Current fees as of 17 September 2021 are:

• ACT: $155
• New South Wales: $147.70
• Northern Territory: $152.00
• Queensland: $197
• South Australia: $176
• Tasmania: $141.07
• Victoria: $121.40
• Western Australia: $181.30

4. Additional lender’s fees

In addition to your application fee, you may have to consider other costs such as valuations and entry or exit fees. While each of these costs may not be that much on their own, they can quickly add up — particularly if you have to pay them all in one go.

5. Ongoing costs with your new lender

On top of paying fees to refinance your home loan and sign on with a new lender, it’s important to review the terms and conditions of your refinanced loan for any additional costs. 

While your refinanced home loan may seem worth it up front, it could end up costing you more in the long run. Account-keeping fees, changes to introductory offers, or fixed-rate periods could all affect how much you pay over the lifetime of your loan. 

Another thing to keep in mind is your new mortgage term. If you reset your term loan when refinancing, it means extending the life of your mortgage. This means you’ll likely pay more in interest over time. On the other hand, if you’re planning to pay off your refinanced loan quickly, you’ll be able to take advantage of a lower interest rate while sticking to your existing loan term.

Not sure whether refinancing is right for you? It’s time to crunch the numbers

Our refinancing comparison tool will help you figure out exactly how much you could save on your home loan. You’ll also be able to review different offers on the market to figure out which one has the sharpest rate, if and when you do choose to refinance. Best of all, it’s completely free to use. 

Prefer to speak to a seasoned broker? Contact us today for an obligation-free consultation.