Beginner's Guide to Refinancing Costs

Switching your home loan typically costs between $500 and $3,000 in fees, though some lenders cover part or all of these expenses to win your business.

The decision to refinance your home loan usually comes down to whether the savings outweigh the costs. For Double Bay residents with loan amounts often above the Sydney median, the calculation can look different than it does in other suburbs. A rate reduction of just 0.3% on a substantial loan can offset switching costs within months, but only if you understand what you're paying for and where you have room to negotiate.

Application and Valuation Fees

Most lenders charge an application fee between $200 and $600, though many waive this during promotional periods. The property valuation typically costs $150 to $300, and unlike the application fee, it's harder to avoid. Your lender needs to confirm your property's current value, particularly in Double Bay where apartment values can vary significantly between buildings on the harbour side versus those set back from the water. Some lenders include the valuation in a package fee, others charge it separately, and a few absorb the cost entirely if your loan amount meets a certain threshold.

Consider a Double Bay apartment owner who refinanced to access equity for an investment property. The lender waived the $400 application fee but charged $250 for the valuation. Because the property had appreciated considerably since purchase, the valuation came in higher than expected, which increased available equity and made the $250 feel insignificant compared to the additional borrowing capacity it unlocked.

Discharge Fees from Your Current Lender

Your existing lender will charge a discharge fee to release the mortgage over your property, usually between $150 and $400. This isn't negotiable, and it applies regardless of how long you've held the loan. Some lenders also charge a separate settlement fee or administrative fee on top of the discharge fee, so check your loan documents or call your current lender to confirm the total exit cost.

Break Costs on Fixed Rate Loans

If you're locked into a fixed rate and want to switch before the period ends, break costs can run into thousands of dollars. The calculation depends on the difference between your fixed rate and the current wholesale rate your lender can access, multiplied across the remaining term. When someone in Double Bay is coming off a fixed rate naturally, break costs don't apply. But if you're still within the fixed period and rates have dropped since you locked in, the break cost can be substantial enough to wipe out several years of potential savings.

We regularly see this with clients who fixed during the low-rate environment and are now stuck on rates well above current variable options. The break cost might be $8,000 on a two-year remainder, which sounds steep until you calculate that the rate difference saves $12,000 over the same period. The math matters, and it's specific to your loan amount, your fixed rate, and how much time remains.

Government Fees and Legal Costs

Switching lenders usually means registering a new mortgage, which involves government fees. In New South Wales, mortgage registration costs around $150. You might also need a solicitor or conveyancer to handle the settlement, particularly if you're refinancing to access equity or consolidating other debts into the mortgage. Legal fees typically sit between $300 and $800 depending on complexity. If your refinance is straightforward with no structural changes to the loan or property title, some brokers can guide you through without needing a solicitor, though this depends on the lender's requirements.

Lenders Mortgage Insurance on Refinancing

If your loan amount is more than 80% of your property's value, the new lender may require you to pay lenders mortgage insurance again, even if you paid it on your original loan. LMI protects the lender if you default, and it's calculated based on the loan-to-value ratio at the time of refinancing. In Double Bay, where property values have generally risen, many homeowners find they've built enough equity to avoid LMI when switching. But if you're refinancing to access equity and that pushes your loan above 80% of the property's current value, LMI can add several thousand dollars to your costs. This is one reason a loan health check before committing to a refinance makes sense, as it clarifies whether your equity position allows you to avoid this cost entirely.

Offset Accounts and Package Fees

Some loan packages include offset accounts and other features in exchange for an annual fee, usually between $300 and $400. If improving cashflow is part of why you're refinancing, an offset account can reduce the interest you pay without requiring you to lock funds into the loan itself. The annual fee is often worthwhile if you maintain a decent balance in the offset, though the calculation depends on your loan amount and how much you typically keep in transaction accounts. Double Bay households with variable incomes or irregular bonuses often find offset accounts particularly useful, as they allow flexibility without sacrificing interest savings.

Costs Your New Lender Might Cover

Lenders compete for refinance business, and many offer cashback deals or cover some of your switching costs to secure your loan. Cashback amounts typically range from $2,000 to $4,000 depending on your loan size, and they're paid a few months after settlement. Some lenders will also waive application fees, cover valuation costs, or reimburse your discharge fee from the old lender. These offers change regularly and aren't always advertised prominently, so it's worth asking what's available when you compare options. A $3,000 cashback can effectively eliminate your out-of-pocket costs, though you should still focus on the ongoing rate and loan features rather than the upfront incentive alone.

Call one of our team or book an appointment at a time that works for you. We'll walk through your specific numbers, confirm what your current lender will charge to exit, and show you what the new lender is willing to cover. Refinancing costs are easier to manage when you know exactly what you're paying and why.

Frequently Asked Questions