The costs of switching mortgages

The Hidden Costs of Switching Mortgages

Rates and Fees verified correct on October 25th, 2016

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're not well versed in the costs and 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

    • 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 new property valuation must be higher than 80% of the loan amount. If not, you could potentially be adding 2% 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.

Related: Guide to Lenders Mortgage Insurance

    • 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.
    • 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.

Related: How to avoid early repayment fees

  • 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.
  • 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.
  • Stamp Duty. You may be liable to pay stamp duty when refinancing.  Expect to pay around 0.35 per cent 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

Rates last updated October 25th, 2016.

CUA Fresh Start Basic Variable Home Loan - Owner Occupier

Maximum LVR now 90%

October 7th, 2016

Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years

Comparative rate increases by 0.08%

October 10th, 2016

ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR

Maximum LVR now 80%.

October 11th, 2016

View latest updates

Jodie Humphries Jodie
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Product nameInterest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
3.64% 3.64% $0 $0 p.a. 80% Go to site More info Essentials - Variable Refinancers Only (Owner Occupier, P&I)
A low-interest rate loan suited for refinancing with no application or ongoing fees.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Enjoy a competitive interest rate when you have a deposit of at least 25%.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow from a minimum of $100,000 and $0 ongoing fee.
3.59% 3.60% $0 $0 p.a. 95% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.85% 4.23% $0 $395 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% 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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HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

CUA Fresh Start Basic Variable Home Loan - Owner Occupier

A basic mortgage available only to customers who switch their everyday banking to CUA.

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