What Does It Cost To Refinance?
There may be fantastic motives to transport your own home mortgage to some other bank – pay down debt faster, fund a renovation, lessen your month-to-month repayment – however what approximately the fees of refinancing your own home mortgage? How will refinancing have an effect on your mortgage and is it the proper circulate for you?
What is Refinancing
Our home loan lending specialist Adam explains what is refinancing and how it could help you.
Why refinance your home loan?
Refinancing your home loan might seem like a good idea, especially if there are lower interest rates available and attractive cash-back offers on the market in Australia. As time of writing in March 2022, there are currently cash-backs of up to $4,000 given by some lenders.
With property prices growing so much in the past 12 months, a lot of home owners now have equity in their property from the value of their home rising.
There are several ways refinancing may benefit you. Moving your loan to a new bank might mean you can:
Get a lower interest rate
Reduce your monthly repayments
Unlock equity to fund a renovation, investment or assist cashflow
Get an offset account or redraw facility
The Australian Competition and Consumer Commission (ACCC) itself has said the average borrower could save $17,000 in interest just by switching to a new loan.
However, refinancing does require some effort to be put in on your own behalf. The level of savings generated through refinancing depends (amongst other things) on the size of your mortgage, how many years left on the loan term and how much lower the new interest rate is compared to your current rate.
This needs to be considered alongside the initial costs of refinancing to help you determine whether it’s worth it. These upfront costs to refinance a mortgage can vary depending on the lender and the type of refinancing.
Types of refinance loans
Generally, there are two main types of home loan refinance:
External refinance: When you move your loan to another financial lender
Internal refinance: When you refinance your home loan with your existing lender
Refinancing with your existing lender, for instance, might save you some of the additional fees associated with changing lenders, such as exit, valuation and application fees.
Costs of refinancing a home loan
Here are some of the main costs of refinancing:
Your lender may charge you a break cost if you leave a fixed home loan early.
If you currently have a fixed rate home loan and you want to refinance before the end of the fixed term, you’ll have to pay break fees.
Discharge settlement fee
You might also be charged a discharge settlement fee (aka a settlement, loan exit or termination fee) for closing your home loan.
Lenders charge this fee to cover the cost of admin when you exit a loan. It can apply to both variable rate and fixed rate home loans.
The overall costs will vary depending on which institution you are currently with, which institution you are going to and which state/territory you live in.
Our mortgage lending specialists will explain all costs associated with refinancing and put together the most cost effective strategy.
What are upfront costs for the new loan?
Application fee / Establishment fee
You may need to pay an application fee to cover the admin cost of setting up a new loan when you refinance.
This can be between $150 - $900, with the average being $550.
Property valuation fee
A new lender may need a property valuation to get an accurate picture of your equity. The cost can vary and some lenders may include the valuation in your application fee.
This can be between $50 - $420, with the average being $265
If there are legal costs in settling a new home loan with the lender, you’ll also pay a settlement fee.
This can be between $15 - $650, with the average being $206
Mortgage registration fee
You’ll need to register your new mortgage with state or territory government. When you do, you will pay a mortgage registration fee, which will vary depending on location.
This can be between $100 - $385, with the average being $257
This all comes down to the type of loan you've moved too and the loan you're moving away from.
Is refinancing right for you?
There are potential benefits as well as costs to refinancing your home loan, so it’s important to consider a number of factors before taking the next step. Our lending specialists will ensure your accessing the best refinancing loan for you, however it helps for you to do the below:
Do your research before refinancing
Check any upfront and ongoing fees
Weigh up different home loan types
Consider what a different loan term might mean
Let us introduce ourselves
We're the @realty finance lending specialists who will be assisting you with your home loan. Get to know us so we can help you with your loan. Introducing Adam Robson and Adam Kay, your @realty Finance lending specialists.
Get free expert advice on your home loan
Our Home Loan Lending Specialists have over 10+ years experience helping Australia's with their home loans. They'll guide you through the entire process to help you search, choose and settle your home loan.
1300 299 377
Speak to a home loan specialist
Who are @realty finance?
@realty finance is the finance arm to Australian real estate network, @realty. @realty is a network of real estate professionals that are connected through an innovative technology platforms to leverage the benefits of a team.
There are currently over 700+ @realty Australia wide and have helped thousands of Australians buy & sell property.