What are the costs from the outgoing lender?
Discharge costs
Your outgoing lender is likely to charge you a discharge cost. This is a fee that you’ll pay if you’re switching from one lender to another. It also covers the costs of getting any documentation sorted out to help with the switch.
Break costs
If you’re on a fixed loan and want to end it early (or refinance it) then you are likely to incur a break cost. There’s no set amount for your break cost – the final fee amount will depend on any losses your current lender might have because of your early exit.
What are the costs from the incoming lender?
Loan application fee
Your new lender will charge you an application fee. This is a one-off fee that you’ll pay so the lender you’re refinancing to can set up your new home loan. These fees can vary from lender to lender, so it’s a good idea to contact your new bank or lender to see how much this might cost when refinancing.
Title search fee
If your new lender needs to look up the title of your property, you might have to pay a title search fee for this service. This helps the lender find information about your property so they can work out how much to lend you.
Lenders Mortgage Insurance (LMI)
You might have to pay Lenders Mortgage Insurance (LMI) if you have less than 20 per cent of equity in your current home. This can be a costly fee, so it’s always a good idea to ensure you have the right amount of equity ready to go before refinancing.
Property valuation
Your new lender will have to value the property – and you might have to pay them to do so. A lender needs to look at the property so they can get a proper picture of your equity before they give you the stamp of approval.
How can you prepare for these costs?
These costs can seem overwhelming – we get it! There are some nifty ways to make covering your refinancing fees simple.
Make a budget
See where you can make changes in your spending and saving habits.
Chat to your lender
As some of these costs might already be absorbed by the lender, it’s a good idea to chat to them for further information.
Ask yourself some questions
Answering these thought-starters can help you decide if refinancing is the right choice for you:
- Are the fees associated with refinancing worth going through the process?
- Will refinancing put you in a better position?
- How will refinancing help you achieve your goals?
- Are you in a good position to refinance now?
- How much can you save by refinancing?
Quick tip: We have a refinancing repayments calculator you can use to work out how much you’ll be paying back with your new loan.