How discharge fees for home loans work

Home loan exit fees can make all the difference between a seemingly good deal and one that goes sour.

Discharge fees for home laonsIf you want to pay off your home loan ahead of time or want to refinance an existing home loan you should be wary of the exit fees you might have to pay. While the 2011 ban on exit fees does make matters simpler if you’ve got a variable rate home loan, if you’ve got a fixed rate loan you’ll still have reason to watch out for them. Even a variable rate loan can attract fees in other forms if you decide to repay it before the term is actually over.

Exit fees can come in the form of discharge fees, early termination fees and break costs. Lenders have these in place primarily to deter borrowers from changing loans frequently, but also to cover costs they incur as part of the process.

Exit fee ban

Exit fees, until lot so long ago, discouraged many borrowers from switching loans, given that they often amounted to thousands of dollars. However, as part of reforms to some banking products, government regulations banned lenders from charging exit fees for all variable rate home loans taken out after 1 July 2011. This move came about after the government felt that exit fees served as a major impediment for people trying to switch loans or pay them off early. Fixed rate home loans and variable rate loans taken before 1 July 2011 will still attract exit fees, but anecdotal evidence suggests that if some lenders will waive or discount the exit fees on some variable rate home loans taken out before the ban.

While the government banned exit fees for variable rate loans, lenders can still charge legitimate administrative costs. Discharge fees vary from $150 to $400 and this is what you’ll have to pay to get a hold of your title deeds. Lenders can also charge what they refer to as ‘early discharge’ or ‘early termination fees’. You might have to pay this if you repay the loan amount completely within a stipulated time frame, for example within the first five years. The flipside is that the law states that these charges cannot exceed the losses incurred by lenders owing to such early loan terminations. The most important takeaway to remember is that if you feel these charges are excessive or unfair, don’t hesitate to lodge a complaint with your lender.

What are the big four banks' home loan exit fees?

  • Westpac charges $350 in discharge costs for their Rocket Repay Home Loan
  • CBA charges a discharge fee of $350 for their Standard Variable and Base Home Loans but do not charge a fee for their No Fee Home Loan.
  • NAB charge $350 in discharge settlement fees for their Tailored Home Loan
  • ANZ charge $160 in settlement fees (in addition to other fees to access government records and to lodge paperwork).

How expensive are exit fees?

Just how much you have to pay in the form of exit fees depends on the kind of loan you have. In any case, expect to pay discharge fees, which lenders charge to cover administrative costs (see the table below). If you have a fixed rate loan and want to exit early, you can expect your lender to charge a break fee.

Break fees, also known as break costs or early repayment fees, depend on multiple factors like the original loan amount, outstanding balance, how much time remains on the fixed term and the prevailing interest rate. The higher the outstanding balance, the higher the break costs. The same also applies with the remaining loan term. When it comes to the interest rate, lenders compare the interest rate of loans with the prevailing interest rate—if the prevailing interest rate is lower, expect to pay break costs.

Break costs often come into the picture if you want to leave your home loan when there’s a better deal, or if you make too many additional repayments on your home loan. Even if you’re not leaving your loan to refinance, there are many reasons you might leave your home loan, such as moving overseas or interstate, accepting sudden profitable offers from buyers or receiving a substantial increase in income.

Irrespective of the reason, knowing just how much you have to pay in the form of break costs can help you make an informed decision about your home loan. Remember that there’s no standardised break fee and you can ask your lender ahead of time how much you might have to pay if you choose to repay your loan sooner than scheduled.

Refinancing home loan comparison

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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. NAB Rewards Points offer available, terms and conditions apply.
3.98% 4.97% $0 $395 p.a. 95% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.75% 3.77% $0 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.94% 4.32% $0 $395 p.a. 95% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
CUA Fresh Start Basic Variable Home Loan - Owner Occupier
A basic mortgage with flexible repayments options.
3.99% 4.04% $795 $0 p.a. 90% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.89% 3.89% $0 $0 p.a. 110% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.89% 4.59% $445 $0 p.a. 80% Go to site More info
QT Mutual Bank Mortgage Saver Home Loan
A low rate home loan with no application or ongoing fees.
3.88% 3.88% $0 $0 p.a. 95% Go to site More info
Aussie Optimizer Variable Rate - LVR <= 80% (Owner Occupier + P&I)
No application or ongoing fees and fee free extra repayments.
3.86% 3.87% $0 $0 p.a. 80% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.84% 3.87% $600 $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 a minimum of $100,000 with a $0 ongoing fee.
3.86% 3.90% $595 $0 p.a. 80% Go to site More info

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How can I avoid them?

While having to pay some kind of a fee is almost guaranteed if you choose to repay your loan ahead of time, you can take certain measures to avoid them. If you have a variable rate loan taken before 1 July 2011, you can attempt to ask your lender to waive the fee. If that doesn’t work, you can ask your lender to at least offer you some kind of a discount considering that variable rate loans today don’t charge it.

If you’re looking at refinancing options owing to better interest rates, consider pressuring your lender into offering a discount by stating that you wish to refinance rather than leaving your loan. To keep your business, they may match the offer you have presented to them. With this discount in place, you don’t have to worry about refinancing and the associated exit fees. However, before you bargain with your bank, make sure you study existing options on the market so you know exactly what you’re up against.

People who know they’ll own their homes for limited periods should look for home loans that charge little or no exit fees, even if it means looking for loans with slightly higher interest rates. If you plan to refinance, know that certain non-banks charge as much as 1.5 per cent of your loan amount as early termination fees. Most importantly, read all the fine print relating to exit fees carefully when you apply for a loan, as this can save you considerable heartache later.

If you’ve decided that you want to pay off your loan ahead of time or that you want to switch to a new loan, establish just how much you’ll have to pay as part of the process after accounting for all exit and early repayment fees. If you’re looking for refinancing options, compare the rates of existing loans and find out if you’ll actually save by making the switch. If you’ll save money, go for it.

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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.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)

Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.

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9 Responses to How discharge fees for home loans work

  1. Default Gravatar
    Robert | January 9, 2017

    Just pay off almost the whole loan but leave $50 owing.

    I did this last time I exited a Comm bank Homeloan and as the costs were based on 3 months of interest of the outstanding amount when I went back later to pay the $50 off it was just a couple of bucks.

  2. Default Gravatar
    Max | June 19, 2016

    I have been with ANZ and have switched to another lender. ANZ have charged an ANZ Discharge Production Fee and a ANZ Settlement Fee, both of these fees were listed in the contract so I assume that these are valid fees.
    However they have also charged a Discharge Registration Fee (For WA only) $164.00
    I can’t seem to find anything about this fee, is this a legitimate fee?

    • Staff
      Marc | June 21, 2016

      Hi Max, thanks for the question!

      After some research I found that this could be a state government fee that is payable to Landgate, the Western Australian Land Information Authority, for discharging, transferring or lodging a mortgage.

      More information can be found on the Landgate fees breakdown page, but you may wish to query it with ANZ to find out if this is the same fee.

      I hope this helps,

  3. Default Gravatar
    Richard | April 25, 2016

    I’m with Bankwest variable home loan under 2 years what fees do I have to pay if I sell my house at this stage?

    • Staff
      Marc | April 26, 2016

      Hi Richard,
      thanks for the question.

      For the most accurate estimation of the fees you’ll pay if leaving your loan, contact Bankwest. They will be able to provide you with a quote.

      Generally speaking, the exit fees depend on the specific home loan product and lender, but many lenders charge fees around $300 when discharging a home loan.

      I hope this helps,

  4. Default Gravatar
    Zeia | April 20, 2016

    I have been with westpac home loan for 6 years..and my home loan is variable..i would like to pay my loan out all..what fees do i have to pay…

    • Staff
      Belinda | April 21, 2016

      Hi Zeia,

      Thanks for reaching out.

      I can confirm that there is no early exit fee for any Westpac variable rate home loan. However, to discharge a mortgage there is a fee of $350.

      Kind regards,

    • Default Gravatar
      | July 25, 2016

      Hi there,

      Do you know the exit fees for our variable rate home loan with St George : for $ 300k ?

    • Staff
      May | July 27, 2016

      Hi Gareth,

      Thanks for your inquiry.

      Unfortunately, we do have the information as to how much the exit fees charged by St. George on their variable home loan product. Usually, the exit fee varies from bank to bank. You’d be best if you contact St. George directly to find out how much they would charge for the exit fee.


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