The hidden costs of transferring a home loan to another bank
Watch out for the costs of refinancing your mortgage to get the most out of switching.
We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder.
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. Before you transfer your home loan, do your research to make sure you're actually coming out ahead.
The 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 lenders 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.
- 2. Mortgage Discharge Fees. Don’t confuse these with exit fees. Check your loan agreement to see if your lender charges a discharge fee when you close your home loan account. 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.
- 4. Switching fees. This is a fee you may have to pay when refinancing internally (staying with your current lender but switching to a different mortgage product).
- 5. 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.
- 6. 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.
- 7. 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.
Refinancing costs estimate
To give you a clearer example of the costs above, we've broken down an example estimate of the fees you may face when refinancing your mortgage. Note that some of these fees can vary from one lender to another.
|Mortgage deregistration fee||$120 (varies according to state)|
|Mortgage registration fees||$120 (varies according to state)|
|Bank valuation fee||$220|
|Title search fee||$30|
|Preparation of mortgage documents||$100|
|Total refinancing costs:||$1,325|
If you're interested in switching to a cheaper or better home loan, then start comparing your options in the table below.
Refinancing Home Loan Comparison
After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.
- A comparison of home loans from multiple lenders.
- Expert guidance through the entire application process.
- Free suburb and property reports.
The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)
More guides on Finder
Investment loans almost halved in cost since COVID-19
While COVID-19 has delivered a number of economic challenges, there is one area where Australians have benefits – with investment loans now cheaper than they've ever been.
Refinancing avalanche: Australians to save $389 million
Christmas might be coming early for thousands of borrowers with a home loan, according to Finder, Australia’s most visited comparison site.
Principal and interest home loans
Read Finder's guide to understanding principal and interest home loans.
How to save for a house deposit while still paying rent
SPONSORED: Saving enough for a house deposit while you're paying rent is challenging, but it can be done.
A splashback is a must-have feature in any modern kitchen.
Pepper Money No Fee Personal Loan Review
Find out more about Pepper Money's no fee personal loan and benefit from a competitive rate from 6.95% p.a., zero fees and loan terms of up to 7 years.
Health Professionals Bank Credit Card
Get an introductory rate of 7.9% p.a. on purchases and balance transfers for 6 months and save with an ongoing $0 annual fee with the Health Professionals Bank Credit Card.
Energy bills are Australia’s second biggest money worry
Coming second behind your mortgage.
How much will a reverse mortgage cost you?
SPONSORED: Calculating the potential costs of a reverse mortgage can be tricky. We'll break it down step by step for you.
Financial Fitness Challenge Week 3: How to get the most out of a credit card
How to cut debt and make your credit card work for you.
Home Loan OffersImportant Information*
Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.
Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.
Ask an Expert