The hidden costs of transferring a home loan to another bank

Refinancing your home loan could save you thousands of dollars in the long term, but it pays to be mindful of the hidden costs of switching your mortgage.

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When you refinance your home loan to a new lender, it can lead to significant interest savings and cheaper home loan repayments each month. But before you make the switch, you need to ensure you're fully aware of the costs involved.

While you may have found a new lender with a cheaper interest rate, lower ongoing costs or better features compared to your current mortgage, refinancing can be a costly process. Before you transfer your home loan, do your research to make sure you're actually moving to a better deal.

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 expected, 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 bank or 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 ask 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, but they can be as low as $100. Some banks may waive this fee altogether.

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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.

Expense typeCost
Discharge fees$100-$200
Mortgage deregistration fee$120 (varies according to state)
Mortgage registration fees$120 (varies according to state)
Application fee$500
Settlement fee$75
Bank valuation fee$220
Title search fee$30
Preparation of mortgage documents$100
Total refinancing costs:$1,325

You can also use our calculator below to estimate your total switching costs.

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

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$
% p.a.
years
Name Product Interest Rate (p.a.) Comp. Rate^ Application Fee Ongoing Fees Maximum Insured LVR Amount Saved
UBank UHomeLoan Variable Rate
2.34%
2.34%
$0
$0 p.a.
80%
$48,903.84
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
St.George Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
80%
$43,171.24
Up to $4,000 refinance cashback. With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get up $4,000 cashback and borrow up to 80% of the property's value (terms, conditions & exclusions apply).
Macquarie Bank Basic Home Loan
2.49%
2.49%
$0
$0 p.a.
60%
$44,719.6
A competitive variable rate home loan for owner-occupiers. Requires a 40% deposit.
Westpac Flexi First Option Home Loan
2.29%
2.72%
$0
$8 p.a.
95%
$50,287.27
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.
HSBC Fixed Rate Home Loan
1.88%
2.98%
$0
$0 p.a.
80%
$61,434.54
Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
Suncorp Back to Basics Home Loan
2.54%
2.55%
$0
$0 p.a.
80%
$43,314.23
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
UBank UHomeLoan Fixed
1.75%
2.22%
$0
$0 p.a.
80%
$64,892.81
This very low fixed rate is only available until 26 February 2021. Other conditions apply. A competitive fixed rate loan with no ongoing fees. Requires a 20% deposit
Athena Variable Home  Loan
2.19%
2.19%
$0
$0 p.a.
60%
$53,040.06
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Suncorp Home Package Plus Fixed
1.89%
2.94%
$0
$0 p.a.
80%
$61,167.02
Lock in a low fixed rate loan for two years and get the annual package fee waived in the first year. Available for borrowers with 20% deposits.
Well Home Loans Balanced Fixed Home Loan
1.94%
2.18%
$250
$0 p.a.
90%
$58,987.91
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.
St.George Fixed Rate Advantage Package
2.09%
3.46%
$0
$395 p.a.
95%
$55,020.05
Lock in a low fixed rate for the first two years. Refinancers borrowing $250,000 or more can get cashbacks between $2,000 and $4,000 depending on their loan to value ratio (Other terms, conditions and exclusions apply
Westpac Fixed Option Home Loan Premier Advantage Package
2.09%
3.5%
$0
$395 p.a.
95%
$55,375.62
Up to $3,000 refinance cashback.
Competitive fixed rate home loan. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
homeloans.com.au Low Rate Home Loan with Offset
2.14%
2.16%
$0
$0 p.a.
60%
$54,408.06
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Well Home Loans Balanced Variable
2.17%
2.2%
$250
$0 p.a.
80%
$52,723.37
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Virgin Money Reward Me Fixed Rate Home Loan
2.04%
2.79%
$300
$10 p.a.
80%
$56,525
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 26 February 2021 and settle by 28 May 2021.
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Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

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.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get up $4,000 cashback and borrow up to 90% of the property's value. (Terms, conditions & exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

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.

Logo for Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)

Get a competitive variable interest rate with no application fee or ongoing fees.

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2 Responses

    Default Gravatar
    KarenJanuary 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

      Avatarfinder Customer Care
      DeeJanuary 23, 2017Staff

      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.

      Cheers,
      Anndy

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