Refinancing your home loan can potentially save you money in the long run, but exiting your current loan might cost you. Whether you want to stay with your current lender but consider other loan products, or you’re thinking of switching lenders entirely, you should consider the costs of refinancing when making your decision.

The costs of refinancing your home loan

While the terms and conditions of every home loan are different, there are a few common fees and costs you should keep an eye out for:

Lenders Mortgage Insurance (LMI)

If your loan amount is currently more than 80% of the property value you may have to pay for LMI. Depending on the size of the loan, LMI can cost several thousand dollars, so it’s important to be aware of this early on in the refinancing process. It’s generally not transferrable between loans so you may have to pay for LMI again even if you’ve paid for it with your existing lender; but each lender is different and with certain lenders you might be entitled to some form of refund – it doesn’t hurt to ask!

Discharge fee

A discharge fee is charged by your existing lender to cover the admin costs involved in closing your loan. This fee will generally be a few hundred bucks and should be stated in your original loan contract.

Break fee (also known as early payment fee)

Break fees apply to fixed interest rate home loans and may be charged by your existing lender if you switch to another lender before the end of the fixed term. Contact your current lender to discuss any break fees that may apply to your fixed rate loan.

Application or establishment fee

If you’re refinancing your home loan with a new lender, the new lender may charge you an application or establishment fee, which can be as much as $1,000. Currently, if you refinance with a Suncorp Bank Back to Basics home loan and borrow $150,000 or more, you won’t be charged an establishment fee or monthly account keeping fees¹. For more information on this offer, chat to one of our friendly Mobile Lenders!

Valuation fees

Each time you refinance, lenders will request a valuation of the property to assess whether it’s increased or decreased in value. Depending on your lender, this usually costs between $100-$600.

Mortgage registration fees

The mortgage registration fee is a government fee that varies between states and usually costs between $100-$200. You can use our Government Fees Calculator to see how much this is in your state or territory.

Stamp duty

If you increase the size of your loan when refinancing, you may have to pay stamp duty. This varies between states so speak to your lender to see if you’re liable and how much you might have to pay.

Ongoing fees

On top of the one-off fees you might have to pay when refinancing, consider ongoing fees. Monthly, annual and redraw fees can make a significant difference to the overall value of a home loan. Although you may have already been paying these, it’s important to know their cost with other potential lenders.

Is refinancing worth it?

While refinancing likely comes with added expenses, it could save you money in the long term. The point where the amount you’ve saved cancels out the amount you paid to refinance is called your break-even point. Reaching this might not take as long as you think – for some people it can be reached in a matter of months.

To find your break-even point, divide your total refinancing costs by how much you will save each month. For example, if it’s going to cost you $1,500 to refinance but you’re going to save $150 a month, divide $1,500 by $150 to get 10. So, your break-even point would come around 10 months after you refinance your mortgage.

Calculate your potential savings

How long does it take to refinance?

Refinancing your home loan doesn’t happen overnight. Once you’ve done your research and have decided on a new lender or home loan product, it usually takes between 30 and 60 days depending on the complexity of your application. If you choose to switch to a Suncorp Bank home loan, we aim to process your application as quickly as possible.

If you’d like to find out more about refinancing your home loan, Suncorp Bank’s Mobile Lenders can answer any questions you might have. Get in touch today for an obligation-free consultation to help you decide whether this is the right option for you.

Refinance your home loan with Suncorp Bank

Published 23 December 2022