What’s Involved With Refinancing a Home Loan?

What’s Involved With Refinancing a Home Loan?
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Even if you’re paying too much for your home loan, you may feel like refinancing isn’t worth the hassle or the cost. But recent research shows that with so many lenders offering low interest rates with cashback deals, borrowers who refinance may not only get a better mortgage deal, but actually save money.

The basics – what is refinancing?

Refinancing refers to switching from one home loan to another, often with a different bank or mortgage lender. Refinancing can allow you to benefit from lower interest rates or cheaper fees, so you can pay less on your mortgage from month to month, or pay off your property faster and save on interest charges.

What costs are involved when refinancing?

Some of the fees you may need to pay when you refinance a home loan include:

  • Settlement fee
  • Discharge fee
  • Application fees
  • Legal fees

According to RateCity, the average cost of these fees when refinancing a home loan is just under $600, though this could vary anywhere from around $140 to more than $1800, depending on the lenders involved.

Refinancing costs


(Excl. $0 fee)

Largest fee Average

(Excl. $0 fee)

Settlement fee $60 $630 $196.20
Discharge fee $75 $895 $307.28
Application fees $140 $995 $512.46
Legal fees $150 $700 $331.92
Total upfront fees $140 $1835 $598.81

Source: RateCity.com.au. Data accurate as of 03.05.2021. Excludes $0 results. Additional refinancing costs, such as lender’s mortgage insurance, will depend on an individual’s mortgage.

A few lenders may also charge zero fees, or offer to cover a borrower’s settlement and discharge fees and/or waive upfront costs to attract new customers.

Keep in mind that there may be other costs involved when you refinance, such as Lender’s Mortgage Insurance (LMI) if you have less than 20 per cent equity available.

While refinancing to a lower interest rate should let you save money in interest charges on your mortgage, it may take some time before these savings make up for the upfront cost of refinancing.

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The real cost of refinancing a mortgage

At the time of writing, many banks and mortgage lenders are not only offering record low fixed interest, but cashback deals for refinancers.

RateCity has done the hard work for you and worked out how much you could potentially save by refinancing to a 3-year fixed rate with one of Australia’s big four banks:

Big four bank lowest fixed rate loans – fees

Cost CBA Westpac NAB ANZ Average
Application fee $0 $0 $0 $0 $0
Settlement fee $200 $0 $0 $0 $50
Valuation fee $0 $0 $0 $0 $0
Legal fee $0 $0 $0 $0 $0
Annual fee $395 $395 $395 $395 $395
Discharge of pre-existing mortgage registration fee $143.50 $143.50 $143.50 $143.50 $144
NSW – Mortgage Registration fee $143.50 $143.50 $143.50 $143.50 $144
NSW – Title Search fee $20 $20 $20 $20 $20
Discharge fee from previous lender $350 $350 $350 $350 $350
Total cost of refinancing without cashback $1,252 $1,052 $1,052 $1,052 $1,102
Cashback -$2,000 -$3,000 -$2,000 -$3,000 -$2,500
Total cost of refinancing -$748 -$1,948 -$948 -$1,948 -$1,398

Note: Big four bank’s lowest rates are package rates that have an annual fee of $395. Government fees are based on refinancers in NSW. The title search fees are estimates only and can often range from between $10 – $30. Title search fees are averaged as figures slightly differ across the market. Data accurate as of 03.05.2021.

TL/DR: Refinancing to a big four bank’s 3-year fixed rate may cost you $1,102 in upfront fees on average. But when you factor in cashback deals on offer, you may start out $1,398 better off from refinancing, even before you factor in the savings from a lower interest rate.

Where can I get a home loan cashback deal?

RateCity has found 22 lenders offering cashback deals between $1500 and $4000, with most being specifically offered to refinancers:

Home loan cashback deals on offer

Lender Cashback value
ANZ (broker only) $ 3,000
CBA $ 2,000
NAB $ 2,000
Westpac $ 3,000
Reduce Home Loans $ 5,000
Bank of Melbourne $ 4,000
BankSA $ 4,000
People’s Choice Credit Union $ 4,000
RAMS $ 4,000
St.George Bank $ 4,000
HSBC $ 3,288
Bank of Queensland $ 3,000
P&N Bank $ 3,000
Virgin Money $ 3,000
Credit Union SA $ 2,500
Bankwest $ 2,000
CUA $ 2,000
MyState Bank $ 2,000
Newcastle Permanent $ 2,000
Police Bank $ 2,000
86 400 $ 2,000
BankVic $ 1,500

Source: RateCity.com.au. Data accurate as of 03.05.2021.

Note: Reduce Home Loans is offering $5,000 cashback for home loans of $1+ million. All big four banks are offering cashback deals (ANZ through a broker). Most cashbacks are for refinancers only.

One last word of caution before you rush out to refinance: you’ll still need to fulfil the lender’s eligibility criteria to qualify for a cashback deal. Consider comparing the interest rates, fees, features and benefits of the different mortgage deals to find an offer that suits your financial situation and personal goals.

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