When to Refinance & What It Actually Costs

Refinancing your mortgage can reduce your monthly repayments and save thousands over the life of your loan. But the upfront costs involved mean not every switch makes financial sense.

For migrants who may have built equity in their first Australian property or are coming to the end of a fixed rate period, understanding what you'll actually pay to refinance your home loan matters as much as the new interest rate itself. Application fees, valuation costs, and discharge fees can add up quickly, and some lenders advertise low rates while loading costs elsewhere.

What You'll Pay to Switch Lenders

Refinancing typically costs between $500 and $1,500 in direct fees, though this varies depending on your lender and loan structure. You'll pay a discharge fee to your current lender, usually between $150 and $400, which covers the administrative cost of closing your loan and removing the mortgage from your property title. Your new lender will charge an application fee, often $300 to $600, though some lenders waive this during promotional periods. A property valuation is usually required and costs between $200 and $400 depending on your property type and location.

If you're coming off a fixed rate and your fixed rate period is ending, you won't face break costs, but if you're still within a fixed term, exit fees can run into thousands of dollars depending on how much time remains and how far rates have moved since you locked in.

Consider a borrower with $450,000 remaining on their mortgage who refinances to reduce their variable interest rate by 0.5%. Over a remaining loan term of 25 years, that rate reduction would save roughly $35,000 in interest. Even with $1,200 in upfront refinancing costs, the switch pays for itself within the first year and continues to deliver savings.

When Refinancing Costs Don't Make Sense

Switching lenders becomes less worthwhile when the interest rate difference is small or your remaining loan balance is low. If you're refinancing to access a rate that's only 0.15% lower than your current rate, and your loan balance is under $200,000, the total interest savings over the remaining term may only just cover the refinancing costs.

In our experience, migrants who refinance within two to three years of their original purchase often underestimate how much equity they've built. If your property has increased in value and your loan-to-value ratio has dropped below 80%, you may also be able to remove lender's mortgage insurance on the new loan, which can offset some of the refinancing costs.

Hidden Costs That Catch Migrants Off Guard

Some refinancing costs don't appear on a lender's standard fee schedule. If you're consolidating debts into your mortgage or accessing equity for an investment property deposit, your new loan amount increases, which can push you into a higher interest rate tier or require additional documentation and credit checks. Settlement fees, title search fees, and government charges can add another $500 to $1,000 depending on your state.

If your current loan has an offset account or redraw facility that you use actively, confirm whether your new loan offers the same features. Losing access to an offset account might cost you more in lost interest savings than you gain from a lower rate, particularly if you keep a buffer in that account for irregular expenses or future plans.

How to Calculate Whether It's Worth It

Work backwards from the rate difference and your remaining loan balance. Multiply your loan amount by the interest rate reduction, then compare that annual saving to the total upfront cost of refinancing. If the upfront cost equals less than 12 months of interest savings, the refinance usually makes sense. If it takes longer than 18 months to recover the cost, and you're planning to sell or pay down the loan aggressively, the numbers become less clear.

A loan health check gives you a clear comparison of what you're currently paying versus what's available. For migrants whose income or employment situation has changed since their original application, refinancing also provides an opportunity to restructure the loan to match your current circumstances, whether that means switching from variable to fixed, adjusting the loan term, or accessing equity you've built.

What to Ask Before You Apply

Before starting a refinance application, confirm the total cost in writing. Ask your new lender for a breakdown that includes application fees, valuation costs, settlement fees, and any ongoing monthly or annual fees. Check whether your current lender charges a discharge fee and whether that fee increases if you're discharging the loan early.

If you're moving from a loan with a redraw facility to one with an offset account, understand how each works and whether the switch affects your cash flow or tax position. Redraw facilities let you withdraw extra repayments you've made, while offset accounts sit separately and reduce the interest charged on your loan balance. For migrants building wealth across multiple properties or planning to access equity later, the structure matters as much as the rate.

Refinancing isn't just about securing a lower rate. It's about making sure the total cost of the switch, including what you pay upfront and what you might lose in features or flexibility, still leaves you in a stronger financial position than staying where you are. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions