For most borrowers, the savings that come from switching home loans far outweigh the costs that come with discharging one loan and setting up a new one.
But that's not always the case. Borrowers on fixed rate loans, or who have little equity built up in the property, risk paying hefty penalties for refinancing. The smart refinancer calculates their switching costs before making the move to a new loan.
Refinance your home loan today – check out 250+ rates, fees and cashback offers
"It's important to know what costs are involved before commencing – but it's also important to know what the cost will be by staying with your current lender. Mortgage brokers generally have a calculator they can use to show you the savings in year 1 and subsequent years which accounts for any fees, so it's handy to ask for this. Cash backs are still around at some lenders, so this is a way you can offset the costs associated with refinancing a mortgage."
To give you a clearer example of the costs above, we've broken down an example estimate of the fees you may face when refinancing your mortgage. Note that these fees can vary from one lender to another.
| Expense type | Cost |
|---|---|
| Discharge fees | $100-$200 |
| Mortgage deregistration fee | $120 (varies according to state) |
| Mortgage registration fees | $120 (varies according to state) |
| Application fee | $500 |
| Settlement fee | $75 |
| Bank valuation fee | $220 |
| Title search fee | $30 |
| Preparation of mortgage documents | $100 |
| Total refinancing costs: | $1,325 |
You can also use our calculator below to estimate your total switching costs.
| Response | |
|---|---|
| Yes | 93.24% |
| No | 6.76% |
Why pay more to refinance than you need to? There are some easy ways to make switching cheaper.
A low interest rate is always the most important feature of a mortgage. But finding a loan with low fees is a good idea too. Many lenders now offer loans with no upfront fees at all.
It's probably not worth refinancing if you have to pay LMI. You're better off making loan repayments, checking the value of your property (hopefully it's higher than when you bought) and waiting until you own at least 20% of the property.
Then you can refinance without paying thousands in LMI premiums.
Breaking a fixed rate loan can cost hundreds, or possibly thousands of dollars. If you're nearing the end of the fixed period the break cost will be smaller. Refinancing could still be a cost-effective move.
But if you have a big loan and you fixed for several years to come, your break costs could wipe out the savings that come from switching. You may have to wait it out.
Many lenders offer cashback deals to attract refinancers. Home loan cashbacks are worth between $2,000 and $4,000, which should more than cover your costs of refinancing. Just make sure the new interest rate and loan is a good deal compared to your current loan.
Refinancing your home loan sounds like a big task, but it's often easier than applying for your first home loan. If you've been making your repayments, you've built a strong track record to demonstrate to potential lenders that you're a responsible borrower, so half your work is done.
Refinancing involves 7 steps (and if you're reading this guide you've already started):
Check out our in-depth guide to every step of the refinancing process if you need more help.
Not as long as you might think! Check out a video of one borrower's refinancing story.
Unless you have another source of income, it's very difficult to successfully refinance while unemployed.
Refinancing an SMSF home loan is the same as refinancing any other home loan, although it requires some extra thought and consideration.
Refinancing to an interest-only loan can give you lower mortgage repayments and tax benefits for some investors.
Knowing just how much equity you have in your home before you start looking to refinance a home loan is crucial. If you don't have enough equity you might have to pay for LMI again or get stuck with a higher rate.
Our comprehensive guide to refinancing your home loan shows you how to refinance a home loan and start saving today.
When you have bad credit it can be harder when refinancing. Home loans are available even with bad credit though – find out how you can refinance today.
Interest rates are low, giving you the chance to save thousands. See how much less you could pay for your home loan by refinancing today.
Learn how to refinance a home loan to fund the purchase of an investment property.
Consolidate debt, pay less interest and reduce your monthly repayments by refinancing into a single home loan. Here's how it works.
Currently have $275000 mortgage with Bankwest interest rate is 5.3%
Morgage house offering 3.49%
Is it worth changing loans what will my discharge fee be with Bankwest
Hi Karen,
Thanks for your question.
While I can’t answer if changing your lender is indeed the best option for you, our home refinancing guide can help you make the right decision. On the same page, we have also listed the true cost of refinancing as well as your refinancing options.
Before refinancing, you may want to get in touch first with Bankwest and see if you can negotiate a lower rate. They are also able to compute the discharge fee of your loan in case you want to refinance.
Cheers,
Anndy