Understanding the Basics of Refinancing Costs

Refinancing costs typically sit between $500 and $3,000, depending on your lender, loan amount, and whether you're moving to a new property valuation or discharge fees apply.

The decision to refinance usually centres on accessing a lower interest rate or releasing equity from your property. But the upfront costs can catch people off guard if they haven't factored them into the equation. Knowing what you'll pay before you start the refinance process helps you work out whether the move will actually save you money over the time you plan to hold the loan.

Application and Settlement Fees

Most lenders charge an application fee when you apply to refinance, typically between $300 and $600. Some lenders waive this fee as part of a promotional offer, particularly if you're refinancing a larger loan amount. Settlement fees usually add another $200 to $400 and cover the administrative work involved in finalising your new loan and discharging the old one.

These fees are often negotiable or absorbed into the loan itself if you don't want to pay them upfront. In our experience, borrowers who are refinancing to consolidate debt or access equity for investment tend to roll these costs into the new loan balance rather than paying them in cash at settlement.

Discharge Fees from Your Current Lender

Your existing lender will charge a discharge fee to release the mortgage over your property. This fee generally sits between $150 and $400, depending on the lender. It's a standard administrative charge and applies regardless of how long you've held the loan or why you're leaving.

If you're coming off a fixed rate period and refinancing within a few months of the fixed rate expiry, the discharge fee is usually the only cost from your current lender. But if you're exiting a fixed rate loan before the term ends, break costs can apply, and these can be substantial depending on how much time remains and how far rates have moved since you locked in.

Property Valuation Costs

Most lenders require a property valuation when you refinance your home loan. The valuation fee typically ranges from $200 to $400 for a standard residential property in Melbourne, though it can be higher for properties in regional areas or for more complex property types like units with shared facilities or properties on larger land parcels.

Some lenders offer to waive the valuation fee if you're refinancing a loan above a certain threshold, or they may use an automated valuation model instead of a full inspection. If your property has increased in value since you purchased it, the valuation can work in your favour by reducing your loan-to-value ratio and potentially giving you access to a lower interest rate tier.

Legal and Title Search Fees

You'll typically pay between $200 and $500 for legal fees and title searches as part of the refinance process. These costs cover the work involved in verifying ownership, checking for encumbrances, and registering the new mortgage on the title.

If you're using a solicitor or conveyancer to manage the settlement, their fees may be slightly higher depending on the complexity of your situation. Some brokers can recommend conveyancers who specialise in refinancing and keep costs contained, particularly if you're refinancing multiple properties at once or dealing with a time-sensitive situation like a fixed rate expiry.

Ongoing Account Fees After Refinancing

Once your new loan settles, you'll start paying any ongoing account fees attached to the loan. These might include monthly service fees, annual package fees, or fees for specific features like an offset account or redraw facility.

Many borrowers refinance to access better features, such as an offset account that reduces the interest they pay over time. If your current loan doesn't offer these features, the value of adding them often outweighs the cost, particularly if you maintain a consistent balance in the offset account. Monthly service fees typically range from $10 to $30 per month, though some lenders waive these fees if you hold a package loan or meet certain criteria.

When Refinancing Costs Outweigh the Savings

Refinancing makes financial sense when the interest you'll save over the next few years exceeds the upfront costs. A borrower with a loan amount of $500,000 who refinances to a rate that's 0.5% lower will save roughly $2,500 per year in interest. If the refinance costs total $2,000, the break-even point sits at around 10 months.

But if you're planning to sell the property within the next year or two, or if you're only accessing a marginal rate reduction, the costs can erode the benefit. This is where a loan health check becomes useful, as it lets you compare your current loan against what's available in the market and see whether the numbers justify the move.

Factoring Costs into Your Refinance Application

When you apply to refinance, you can choose to pay the costs upfront or add them to your new loan balance. Paying upfront reduces the amount you'll pay interest on over the life of the loan, but it requires cash at settlement. Rolling the costs into the loan keeps your cash available for other priorities, though it does increase the total amount you'll repay over time.

If you're refinancing to release equity for a deposit on an investment property, it often makes sense to add the refinance costs to the loan so you preserve your cash for the deposit and associated purchase costs. If you're refinancing purely to reduce your interest rate and improve cashflow, paying the costs upfront can deliver a cleaner financial outcome.

Call one of our team or book an appointment at a time that works for you. We'll run through your current loan, the refinance options available, and give you a clear view of what the move will cost and what it will save you over the time you plan to hold the loan.

Frequently Asked Questions