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Costs & break fees

What refinancing really costs — line by line

A lower rate only helps if the saving beats the cost of switching. Here is every fee a refinance can attract, what each typically runs to, and the fixed-rate break cost that catches most people out.

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The single biggest mistake in refinancing is comparing rates and ignoring costs. A refinance is only worthwhile when the total benefit over the time you keep the loan clearly beats the total costof switching. Here is the full cost picture.

The standard switching costs

Discharge fee (your current lender)

Charged to close your existing loan and release the mortgage. Usually a fixed amount, commonly $150–$400. Almost always applies when you leave a lender.

Application / settlement fee (your new lender)

The cost to set up the new loan. This ranges widely — from several hundred dollars to zero, as many lenders waive it to win your business. Always ask what is and isn't included.

Valuation fee

The new lender values your property to confirm the security. Sometimes free, sometimes a few hundred dollars. The valuation result matters even more than the fee — a low valuation can change your whole position (see our LMI & Valuation Risks guide).

Government registration & discharge fees

State charges to record the change of lender on your title — a discharge of the old mortgage and registration of the new one. Modest and fixed, but unavoidable.

The big variable: fixed-rate break costs

If any part of your loan is on a fixed rate, breaking it early can trigger a break cost — and this is where refinances go wrong. It is not a flat fee. It is the lender's estimate of its loss from you exiting early, driven mainly by:

  • the difference between the wholesale rate when you fixed and the rate now,
  • your remaining balance, and
  • the time left on your fixed term.

If wholesale rates have fallen since you fixed, break costs can run into thousands and easily wipe out any rate saving. If they've risen, the cost may be small. Never break a fixed loan without asking your lender for the exact figure in writing first.

The LMI gotcha

Lenders Mortgage Insurance is not transferable. If your new loan exceeds 80% of the current property value, you may pay a fresh LMI premium — potentially thousands — even if you already paid it once. This is one of the most expensive and least expected refinancing costs.

Working out your break-even

Add every cost above into one number. Divide it by your expected annual interest saving. The result is your break-even point in years — the time it takes for the refinance to pay for itself. If you comfortably plan to keep the loan longer than that, refinancing makes sense.

For a worked, real-world example of how these fees stack up (and the traps that erase the saving), read the in-depth article below.

Go deeper

Article

What Refinancing Really Costs: Break Fees, LMI and Traps

A worked breakdown of the fees, break costs and LMI gotchas that decide whether a refinance actually saves you money.

Continue through the hub

Reasons to Refinance

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LMI & Valuation Risks

Read

Self-Employed Timing

Read

Frequently asked questions

A discharge fee (sometimes called a termination or settlement fee) is charged by your current lender to close out your existing loan and release the mortgage. It is usually a fixed amount, commonly in the range of $150–$400, though it varies by lender. It applies to almost every refinance to a new lender.
Break costs on a fixed-rate loan are not a flat fee — they are an estimate of the lender’s loss from you exiting early, driven largely by the difference between the wholesale interest rate when you fixed and the rate at the time you break, multiplied by your balance and remaining fixed term. If rates have fallen since you fixed, break costs can be very large; if rates have risen, they may be minimal. Always request an exact figure from your lender before deciding.
Possibly. Lenders Mortgage Insurance is not portable between lenders, so if your new loan is above 80% of the property’s current value you may pay a fresh premium even if you paid one originally. This is covered in detail in our LMI & Valuation Risks guide.
Yes. State governments charge mortgage registration and discharge fees to record the change of lender on the title. These are relatively modest (typically under a few hundred dollars combined) but they are unavoidable and should be included in your cost total.

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