How much does it really cost to refinance your home loan?

Many Australians choose to refinance their mortgage because interest rates have increased and they want to enjoy lower repayments. And while you can potentially see big savings over the long term, it’s important to consider the costs of refinancing.

This guide will explore the real fees involved when refinancing and show you how to find a better deal by comparing home loans online.

Key Points

  • There are a number of refinancing fees you need to be aware of before starting the process. These include application and discharge fees, valuation costs and potentially Lenders Mortgage Insurance (LMI).

  • You'll need a few items of paperwork to refinance, but thankfully it’s not as exhaustive as applying for your first home loan.

  • Refinancing generally takes between four and eight weeks depending on your lender, although finding a lender takes just a few minutes when comparing online.

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What is refinancing? 

Also commonly referred to as ‘remortgaging’ your home, when you refinance a home loan you're essentially taking out a new loan to cover your old one. There are various reasons why you might be doing this, such as lowering your repayments or reducing the life of your loan.

Sometimes homeowners stay with their current lender when refinancing, but generally to find the best deal you'll need to compare home loan rates from multiple lending institutions, which is where our experts in home loans come in.

Do you need a lawyer for refinancing your home loan?

Just like when you first took out a home loan, it can sometimes feel overwhelming having to collect all the right paperwork, manage your finances and then do all the research to compare the best home loans currently available. So it makes sense that you might want to hire the services of a professional, which is where a lawyer can help.

Whether or not you need a lawyer comes down to personal preference. 

Our brokers can help you navigate the world of refinancing, but there’s nothing stopping you from hiring a lawyer as well.

What fees do you have to pay to refinance?

Despite the fact that you can refinance to get a lower interest rate on your home loan, be aware that there will be fees involved. So how much does it cost to refinance a home loan?

It’s important to note that all of these fees MAY apply depending on your lender and your circumstances, but our mortgage brokers will do their best to help you minimise these fees as much as possible during the refinance process.

The cost to refinance can include (but are not limited to):

  • Termination fee (aka discharge fee) for your current home loan, which can range from no more than $500 depending on your lender.

  • Application fee for the new loan. 

  • Valuation fee for an up-to-date valuation of your property.

  • Land registration fees.

  • Break fees, such as if you are currently on a fixed-interest loan.

  • Document, legal and settlement fees.

  • If you have less than 20% equity in your home, you may end up having to pay lenders mortgage insurance.

Also bear in mind that there will be the ongoing fees associated with your new loan.

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What are the hidden costs of refinancing a mortgage?

Technically, there will be no ‘hidden fees’ when refinancing – everything you will have to pay will be written down on the relevant paperwork. However, if you’ve never remortgaged your home before then you may not be aware of all the costs.

To ensure you aren’t caught out by unexpected costs, review all the fees mentioned above and speak to your lender for more information.

What documents do you need to refinance your home loan?

Even if you are refinancing with your current lender, the refinancing process generally takes a few weeks and requires you to provide important information about yourself and your financial capacity. The requirements will differ from lender to lender, however generally you can expect to provide:

  • Personal identification documents (e.g. passport or driver’s licence).

  • Proof of income (e.g. recent payslips).

  • Financial and credit documents (e.g. credit card statements, living expenses and other loan documents).

  • Evidence of your current home loan (e.g. home loan statements).

  • Records of any other assets you own (e.g. investment properties or shares).

The good news is that home loan refinance is rarely as paperwork-heavy as applying for your first home loan.

How often should you refinance your house? 

There are no rules about how many times you can refinance your home loan, but the costs involved and the time needed to complete a refinance means you should only do it when it is most cost-effective for your situation.

For example, if you are currently paying well above the going interest rates, it may be the ideal time to refinance. If the costs of refinancing will outweigh any immediate savings on repayments, then it may be more practical to stick with your current loan.

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How can I increase the appraised value of my home for refinance?

Generally when you refinance, the lending institution will order a valuation. This will determine how much your property is worth at that moment in time. 

To strengthen your refinancing appraisal value, you might want to do a few things around the home like giving everything a fresh coat of paint, or taking care of any minor defects that could impact the home’s value.

What’s the average cost to refinance a mortgage?

There’s no ‘universal fee’ for refinancing, and it will differ depending on a number of factors, such as your current and new lender, the value of your home and how much equity you have.

Some of the fees you can expect to see are:

  • Loan discharge fee

  • Fixed loan break costs, but this only applies if your current home loan is on a fixed rate

  • Application fee

  • Settlement fee

  • Mortgage registration fee

  • Mortgage discharge registration fee

However, just how much these fees will be depends on your current lender, your new lender and will vary depending on your specific financial circumstances.

How long does refinancing take?

Once you’ve chosen your lender and started the refinancing process, it’s up to your new lender to manage all the administrative work in arranging the terms of transferring your debt. This can take approximately a few weeks to finalise, depending on the loan scenario, lender and the complexity of your application.

Lenders all have different refinance timelines, which our brokers will explain to you so you know just how long refinancing your home loan will take.

The good news is that finding the right lender for refinancing is a lot faster when comparing home loans online. Compare Club can show you some of the best deals available to you in less than two minutes.

Where can I find the best rates for refinancing?

You can speak to your current lender about what type of deal they can offer for refinancing, or you can compare with us and speak to brokers with years of industry experience.

By comparing home loans with Compare Club, we could help you find a home loan that suits your circumstances from over 40 lenders. It’s quick and easy, and you can get started right now.

This guide is opinion only and should not be taken as financial advice. Check with a financial professional before making any decisions. Fees, charges, terms and conditions apply.

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.

*Based on internal Compare Club data. Correct as of 8th July 2022.