Refinancing your home loan can save substantial amounts in interest, but it is not free. Understanding every cost involved before you switch is essential to calculating whether refinancing actually makes financial sense for your situation.
Discharge fee: Your current lender charges a fee to release the mortgage from the property title. Typically $150–$400. Always confirm this amount with your current lender before starting the refinance process.
Break costs: If you are currently on a fixed rate loan, breaking it before the term ends can trigger significant break costs. These can range from $0 (if rates have risen since you fixed) to $30,000+ (if rates have fallen significantly). Request a break cost estimate from your current lender before making any refinancing decision. See the Break Costs guide for full detail.
Deferred establishment fee (DEF): Older loans (pre-2011) may include a deferred establishment fee, which reduces over time. If your loan has a DEF, check whether it applies. Laws introduced in 2011 banned DEFs on new loans, but they still exist on older contracts.
Application / establishment fee: Your new lender may charge $0–$800 for setting up the new loan. Many lenders waive this or offer a cashback to offset it. Always negotiate.
Valuation fee: The new lender will commission a fresh valuation of your property. Typically $200–$600, though many lenders absorb this cost for refinances. Some lenders use an automated valuation model (AVM) for straightforward suburban properties, which is faster and typically free.
Mortgage registration fee: The state government charges to register the new lender's mortgage on the title and discharge the old one. Typically $200–$400 in total, state-dependent.
Legal fees: Some lenders charge $200–$400 for loan document preparation. Others absorb this entirely.
If your current loan LVR is above 80%, you may be required to pay LMI again when refinancing — even if you paid LMI on the original loan. LMI policies are not transferable between lenders. If you are close to 80% LVR (say 81–85%), it may be worth making extra repayments to cross the 80% threshold before refinancing to avoid LMI entirely.
LMI transfer: Some lenders have a reciprocal LMI recognition arrangement (Helia and QBE may recognise each other's policies in limited circumstances), but this is not universal and cannot be relied upon. Always confirm whether LMI applies to your refinance before proceeding.
The break-even calculation tells you how long it takes for the interest savings from the lower rate to exceed the total switching costs:
Example: Total costs $2,500. Monthly saving from 0.4% rate reduction on $500,000 = $167. Break-even = 15 months. If you plan to hold the loan for more than 15 months, refinancing saves you money. Use the Refinancing Break-Even Calculator to model your scenario.
Many lenders offer cashback payments ($2,000–$4,000) to borrowers who refinance to them. These cashbacks can offset switching costs, but compare the net saving — a $3,000 cashback from a lender with a 0.2% higher rate than a no-cashback competitor is worse on a $600,000 loan over 3 years. See the Cashback Offers guide.