What fees to expect when refinancing
your home loan
There are many reasons you might consider refinancing your home loan. You might need a bit of extra cash to finance a much-needed renovation, or you’ve seen some enticing offers advertised. You may also be looking to consolidate debt, access equity, or explore a loan that better suits your current needs.
While refinancing can offer potential benefits, it’s important to understand the costs involved before making a decision. Some fees may be charged by your current lender, while others may apply when setting up a new loan.
This guide gives a run-down of the most common refinancing fees you can expect to pay. Although some lenders may not charge these fees. it's important to understand which fees may be payable so you can decide if refinancing is right for you.
What costs are involved in refinancing a mortgage?
Loan application fee
Valuation fee
Just as with your original home loan application, your lender may need to value your property as part of the refinancing process. The fee covers the cost of this service, which uses a registered valuer.
A property valuation helps your lender understand the current market value of your home before approving the new loan.
Sometimes, the valuation fee will be combined into the loan application fee.
Settlement fee
Settlement fees are costs incurred to ‘settle’ your new loan. These can include accounting, legal, and administrative costs. It may also include the valuation fees mentioned above.
In simple terms, settlement fees help cover some of the work involved in finalising and setting up your new loan. While individual charges may seem small, they can add to the overall cost of refinancing.
Discharge fees on existing loan
This is different from the settlement fee. Your previous lender may charge you discharge or exit fees to close your existing loan as part of the refinancing process. This is essentially the cost of closing out your current loan before moving to a new lender.
Home loan exit fees were abolished for loans finalised after 1 July 2011 for variable rate loans, but lenders may still charge a discharge fee to reimburse them for reasonable administrative costs arising from closing out your existing loan. Any discharge fee should be outlined in your loan contract.
Lenders may also charge what is called a ‘break fee’ for ending a fixed rate loan early.
FAQs about refinancing a home loan
Refinancing a home loan can involve several costs, including loan application fees, valuation fees, settlement fees, discharge fees from your current lender, potential fixed loan break fees, government fees, ongoing administration fees, and lender’s mortgage insurance depending on your circumstances.
A loan application fee is a one-off cost charged to set up a new home loan during refinancing. It may also be called an establishment, set-up or start-up fee and is similar to the fee paid when you first took out your original loan.
A valuation fee covers the cost of assessing your property's current market value. Lenders may require this to understand the value of your home before approving a new loan. In some cases, the valuation fee may be included in the application fee.
Settlement fees are costs associated with finalising your new loan. They can include legal, accounting and administrative expenses involved in completing the refinancing process.
Discharge fees are charges from your current lender to close your existing loan when refinancing. While some exit fees have been abolished, lenders may still charge a discharge fee to cover administrative costs, as outlined in your loan contract.
Fixed loan break fees may apply if you repay a fixed rate loan before the end of the agreed term. These fees compensate the lender for potential losses, particularly if interest rates have fallen since the loan began. Break fees can sometimes be substantial.
Yes, government fees may apply when refinancing, such as charges for closing your existing loan and registering a new one. These fees vary by state or territory and individual circumstances, and in some cases partial reimbursement may be available.
You may need to pay lender’s mortgage insurance when refinancing if you are borrowing a high percentage of your property's value. The cost can be added to the loan or paid upfront, and the amount depends on your equity, risk profile and loan type.
The bottom line
Refinancing your home loan comes with a range of options, so it’s important to consider what might work best for your situation. Before making a move, take the time to weigh up the potential benefits against the costs involved.
While refinancing could help you achieve your financial goals, understanding any fees upfront can help you decide if it’s the right choice for you. It can also be helpful to speak with your mortgage broker, accountant or financial adviser before making a decision.
Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending
Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales.
Published by Pepper Money. Read our Editorial Policy to learn how we create and review content.
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Need some help with your refinancing?
There's a lot refinancing can do; from unlocking your equity to consolidating debts in to your home loan.
Some great resources are here to help you understand your options.
Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
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