How much does it cost to refinance a home loan?
So you’re thinking of refinancing? If so, then be aware: there may be costs involved in switching banks. Remember to weigh up these costs against the long-term benefits when considering refinancing.
It’s no understatement to say that the mortgage sector in 2023/24 has been dominated by refinancing.
With interest rate movements not seen in a generation and over half of all fixed-rate loans expiring during this time, refinancing has been on many home-owner radars.
With some facing their fixed rate expiry bracing for a 63 per cent increase in their monthly mortgage repayments, it’s no wonder.
If you fall into this category, first of all - don’t panic! There’s probably a loan out there that’s just right for your current circumstances. While it will cost you less than simply rolling onto your current bank’s standard variable rate (SVR), there may still be costs associated with it. So if you’re wondering whether the potential savings from switching are worth the costs to refinance, let us break down the main costs for you.
1. Mortgage application fee
If you’re switching banks, you may have to pay a mortgage application or establishment fee. This covers the new bank’s cost of processing your application.
This upfront cost usually ranges from $200 to $1000, depending on the lender and the type of loan. It may or may not include a valuation fee
2. Loan discharge fee
Saying farewell to your current lender may well result in a discharge fee for the administrative costs associated with terminating your mortgage.
Loan discharge fees are usually around $200-$400. However, they can be up to $1000.
3. Property valuation fee
Your new bank may require a valuation to be done when assessing your refinance application. The cost largely depends on the lender and the location of the property. Expect to pay more for rural properties.
Valuation fees may range from $200 to $600 in cities, and $600 to $1000 in rural areas. In some cases, a lender may offer free property valuations.
4. Break fees
If you are on a fixed rate loan, you may have to pay break fees to get out of it early. Break costs can be expensive and complicated to calculate.
The easiest way to understand your break costs is to ask your current lender for a summary.
5. Settlement fee
Do you remember paying a settlement fee when you originally took out your loan? You may be up for that again if you decide to refinance.
Settlement fees are paid to the new lender to settle the loan and typically range from $100 to $400.
6. Mortgage registration fees
The land registry in your state or territory will charge a mortgage registration fee to register your mortgage on the title record for the property.
The cost could be anywhere from $120 to $210.
7. Exit fees
The Federal Government got rid of exit fees from 1 July, 2011—but this is only for contracts signed after this date. If you signed before then, you may still pay exit fees for ending your loan early. Check with your lender if you’re unsure.
How much refinancing could save you
While all of the costs mentioned above may seem overwhelming, it’s important to consider the long-term benefits of refinancing.
How much you could save by refinancing depends on the size of your mortgage, how many years you have left on the loan, how much lower the new interest rate is and whether it has any interest-saving features.
Let’s chat
HoLo can help you decide whether refinancing is the right move for you. We can help you weigh up the costs versus the benefits and explain whether a different loan could better suit your financial situation and goals.
If you’d like to know more, book an appointment - it’s easy on your personal dashboard - or contact us.
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