The costs of switching mortgages

The hidden costs of transferring a home loan to another bank

Know the costs of refinancing your mortgage to get the most out of switching

Although refinancing to a new lender can lead to significant cost savings, you need to ensure that you're fully aware of the costs involved.

While you may have found a new lender with a more competitive rate, minimal ongoing costs or better features compared to your existing mortgage, refinancing can be an expensive process.

'If you’ve already changed banks or you’re considering doing so, make sure you’re aware the hidden costs of switching, even with the recent reduction in mortgage discharge fees,’ says The Investors Club, a leading national property investment group.

According to the Investors Club these are the seven hidden costs you should know about before switching mortgages.

The 6 costs of switching mortgages

1. Lenders Mortgage Insurance (LMI)

When you switch financial institutions, the new lender may require a new property valuation. If your new valuation is lower than planned, you may be required to pay mortgage insurance. To avoid this, your loan amount must not be higher than 80% of the new valuation. If not, you could potentially be adding a significant amount of money to the cost of your loan. Ask your mortgage broker for an upfront valuation before proceeding with your refinance application to ensure that your current valuation is on track.

Guide to Lenders Mortgage Insurance

2. Mortgage Discharge Fees

Don’t confuse these with exit fees. Check your loan agreement to see if your lender charges a discharge fee. This could range from $150- $500. With government charges, expect to pay around $1,000 in total. It's always worth talking to your lender to look for cost reductions when discharging your mortgage.

3. Break Costs on Fixed Rate Loans

When you break a fixed-term loan, your financial institution will charge you for not fulfilling the agreed terms. The amount you pay will vary according to the interest rate your fixed loan was secured under, the current interest rate and the duration of your loan. Charges can often run in the thousands if poorly managed.

How to avoid early repayment fees

4. Direct Debits

One of the biggest difficulties in switching lenders is managing direct debits from your nominated account. If not done well, you could be hit for “over the limit” and cheque dishonor fees. It can be time-consuming to not only change your main account and mortgage, but also update details with other institutions that access your accounts for regular payments.

5. New Application Fees

Your new mortgage will incur upfront application fees and mortgage registration fees which you need to take into account. Application fees typically range from $400 to $750 and mortgage registration varies per state, starting at $100 to $140.

6. Stamp Duty

You may be liable to pay stamp duty when refinancing.  Expect to pay around 0.35% of the loan value plus GST. To get an estimate you can use our stamp duty calculator.

Understanding mortgage refinance costs could save you thousands when you decide to switch lenders. Use our calculator below to estimate your total switching costs.

Use our calculator below to estimate your total switching costs.

Refinancing Home Loan Comparison

Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time 2 year fixed rate for owner occupiers. Conditions apply.
3.84% 4.86% $0 $0 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.84% 4.71% $600 $0 p.a. 95% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.79% 4.46% $0 $375 p.a. 85% Go to site More info Essentials - Variable (Owner Occupier, P&I)
A low-interest rate loan suited for purchases and refinances with no application or ongoing fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.48% $0 $375 p.a. 85% Go to site More info
Finsure Home Loan Deal
Enjoy a low variable rate with $0 application fee.
3.69% 4.03% $0 $299 p.a. 80% Enquire now More info
ING DIRECT Orange Advantage Loan - $150,000+ (LVR <= 80% Owner Occupier, IO)
Pay no annual fee for the first year with this packaged variable rate home loan with offset.
3.94% 4.26% $0 $299 p.a. 80% Go to site More info
Mortgage House Advantage Home Loan 80 - Special Owner Occupier
A low interest rate home loan that allows borrowers to borrow up to 80% of the property value.
3.73% 3.88% $0 $10 monthly ($120 p.a.) 80% Go to site More info Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage a 100% offset account along with no annual or application fee.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info

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Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at Talk to him to find out more about home loans.

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Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate Discount Rate $150k+ <80% LVR (Owner Occupier, P&I)

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2 Responses to The hidden costs of transferring a home loan to another bank

  1. Default Gravatar
    Karen | January 21, 2017

    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

    • Staff
      Anndy | January 23, 2017

      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 on this page 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.


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