Refinancing your home loan can be a great way to blow out the cobwebs from your original loan. You might find a lower monthly payment with a market-appropriate interest rate and have the opportunity to choose a product that’s breezier (less cobwebby) and easier to manage.
That said, a home loan makeover isn’t always so simple. Depending on your circumstances, the cost of refinancing a home loan may not always pay off as fees and loan terms can add up over time.
What’s the cost of refinancing a home loan?
In Australia, the cost to refinance a mortgage can be anywhere between $500 to $2000. Exactly what you’ll pay in fees can depend on whether you’re staying with your current lender – which is usually cheaper – or changing institutions.
Some lenders may waive certain fees to entice your business, so it’s important to talk to your lender to understand precisely what home loan fees you would be paying to refinance before making a decision.
How much are refinancing fees?
| Documentation fee |
$55-600 |
| Discharge fee |
$150-795 |
| Legal fee |
$200-440 |
| Settlement fee |
$100-995 |
| Application fee |
$150-990 |
| Property valuation fee |
$200-484 |
Fees for refinancing explained.
Loan application fees.
When you refinance, you take out a whole new loan. If your lender charges loan application fees, you’ll be stung with them a second time around.
ME offers home loans with zero application fees, which could save you several hundred dollars when you refinance.
Lenders mortgage insurance.
Lenders mortgage insurance is a one-time fee and applies if you have less than 20 per cent equity in your property. Depending on your lender, it can range between 1–5 per cent of your loan amount.
Property valuation for refinancing.
To get an accurate picture of your equity, a new lender may need to do a valuation of your property.
Think of it as the judging portion of an episode of a home renovation show. Some lenders may include the valuation fee in your application; however, costs may vary.
Learn more about home valuations here.
Settlement fee.
This is typically used to cover the cost of having a legal representative of the lender sit down with you and your solicitor or conveyancer at the actual loan settlement.
Mortgage registration fee.
This is the cost of switching your existing mortgage from your current lender to a new mortgage with a new lender.
Ongoing fees.
A low refinance rate could mask high ongoing fees. Be sure to look at exactly what the refinanced home loan will cost you on a regular basis, including any ongoing fees, fixed rate periods or introductory offers.
ME home loans can help you save here, with no ongoing account keeping fees.
Use our Loan Comparison Calculator to get the numbers crunching. Seeing the options side by side will help you choose a product that delivers the best value.
The pros and cons of refinancing your mortgage.
Refinancing can help you save money or get better loan features, but it’s not always straightforward. Before you switch, check out the pros and cons to see if it’s the right move for you.
Pros of refinancing a home loan.
Lower interest rate.
Reducing your monthly repayments could save you money over the life of your loan.
Better loan features.
A refinanced loan may include features such as an offset account, redraw facilities, or more flexible repayment options to help you pay off your mortgage faster.
Consolidate debt.
This can help you streamline your finances and reduce your overall interest.
User experience.
A new lender may offer better customer service or digital tools that help you manage your financial goals more easily.
Cons of refinancing a home loan.
Additional interest.
Your new mortgage may have a longer term, so if you’ve already paid five years on your current loan, refinancing to a new 25 or 30 year term can mean you’ll end up paying more interest overall.
Lenders mortgage insurance.
If your loan to value ratio is over 80 per cent, you will have to pay LMI which can cost thousands.
Loan discharge and break costs.
If you’re on a fixed loan rate, exiting early could mean you’re slugged with a ‘break cost’. Variable rate loans usually have smaller administrative fees.
Make sure the numbers stack up.
While there can be advantages, the cost of refinancing a mortgage is not automatically a good deal. Sometimes the cost of refinancing outweighs the potential savings, especially if you plan to sell or refinance again soon.
The key question to ask is: does the new loan offer benefits you don’t currently have, and does it help you pay off your mortgage faster?
Our refinancing calculator can help you see exactly how much you’ll be paying over the life of your loan.
Easier still, talk to your ME Mobile Bank Manager.
Meet ME.
Talk to your ME mobile banking manager to learn more.
Book a time
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.