How Much Does It Cost to Refinance a Home Loan, and Is It Worth It?

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If you are asking how much it costs to refinance a home loan, the short answer is that most owner-occupiers pay somewhere between a few hundred dollars and about $2,000 in switching costs, and that figure only matters relative to what you save each month. This guide walks through every fee you might meet, shows the break-even maths with a clearly labelled example, and explains when switching lenders is genuinely worth it.

Every cost involved in refinancing a home loan

Costs vary by lender and state, and several of them are often waived, so treat the ranges below as a guide and ask for a written quote. Where we give a range, it reflects what lenders and comparison sites commonly publish rather than a fixed rule.

Cost	Who charges it	What to expect
Discharge (settlement) fee	Your current lender	Commonly a couple of hundred dollars, sometimes more
Government registration fees	State land titles office	Charged to discharge the old mortgage and register the new one, typically in the low hundreds of dollars each
Application or establishment fee	New lender	Often $0 to a few hundred dollars, frequently waived
Property valuation	New lender	Often free, otherwise a few hundred dollars
Break costs	Current lender, fixed loans only	Can be small or zero, or thousands of dollars, depending on the rate movement and time left
Lenders Mortgage Insurance	New lender, if above 80% LVR	A new premium, usually calculated on the new loan

One cost you will not meet is an exit fee. Since 1 July 2011, lenders cannot charge exit fees on new variable rate home loans, so the old habit of being locked in by a penalty on a variable loan has gone. What remains is a modest administrative discharge fee, plus the government charges that every borrower pays when a mortgage is registered or released.

Break costs on a fixed rate loan

Leaving a fixed rate early is the one place where refinancing can become expensive. Break costs reflect what the lender loses when you exit before the fixed term ends. They depend on how much of the term remains, how large your balance is and how market rates have moved since you fixed. When market rates have risen since you locked in, the cost can be small. When they have fallen, it can be large. The only reliable approach is to ask your lender for a written break cost estimate, which is valid for a short period, before you commit. If your fixed period ends within a few months, waiting is often cheaper than leaving early.

Lenders Mortgage Insurance when you refinance

If the new loan will be more than 80% of your property's value, the new lender will generally charge Lenders Mortgage Insurance, and the premium you paid on the original loan does not normally carry across. This is why equity matters so much. A borrower at 72% loan to value ratio has far more choice, and far lower costs, than one at 88%. If your property value has fallen recently, your ratio may be higher than you think, so it is worth checking a current valuation estimate before assuming you qualify for the sharpest rates.

The break-even maths: is refinancing worth it?

The decision comes down to one calculation: total switching costs divided by monthly saving equals the months to break even. If you expect to hold the loan comfortably longer than that, refinancing is worth modelling seriously.

Rate reduction	Current monthly	New monthly	Monthly saving	Annual saving	Break-even
0.25%	$3,991	$3,899	$93	$1,111	16 months
0.50%	$3,991	$3,807	$184	$2,209	8 months
0.75%	$3,991	$3,717	$275	$3,295	5.5 months

Two things stand out. First, the savings scale with the size of your loan, so the same rate gap is worth far more to a borrower with $900,000 outstanding than to one with $300,000. Second, a smaller rate gap is not automatically a reason to stay put. Over a five year horizon, even the 0.25% scenario saves several times the switching cost. What changes the answer is how long you will hold the loan and whether the saving is real after fees.

You can test your own numbers with our rate check tool, which compares your current rate with the market and shows the monthly difference.

When refinancing is usually worth it

• Your rate has drifted. Lenders often price new customers more sharply than existing ones, so a loan that was competitive three years ago may now sit well above market.
• Your fixed rate is about to expire. Rolling onto a revert rate without comparing it to the market is the most common and most costly default. Our guide to fixed versus variable rates explains the trade-offs.
• You want better features. An offset account or a split structure can reduce interest without changing the rate. See how an offset account compares with redraw, or test a combination with the offset calculator.
• Your equity has grown. Dropping below 80% loan to value ratio can unlock lower rates and remove insurance costs.
• You want to consolidate debt or access equity. Our refinance and debt recycling guide covers when this makes sense.

When it may not be worth it

Refinancing is not always the answer. Be cautious if you expect to sell within a year or two, if break costs on a fixed loan are high, if your equity is thin and Lenders Mortgage Insurance would apply, or if the saving is marginal. Also remember that a new lender must assess you under today's rules. APRA requires lenders to test serviceability at a buffer of 3 percentage points above the loan rate, so a borrower whose income or expenses have changed since the original approval can find that a switch is harder than expected. In that case, negotiating with your current lender is the better path.

Watch the cashback fine print

Cashback offers can offset switching costs, but they often come with conditions, such as a minimum loan size and a clawback if you leave within a set period. A larger cashback attached to a higher ongoing rate can leave you worse off after a couple of years. Compare the rate and the cashback together rather than either one alone.

A simple process to follow

1. Ask your current lender for your payout figure, any discharge fee and, if fixed, a written break cost estimate.
2. Estimate your current property value and your loan to value ratio.
3. Compare your rate with the market and calculate your monthly saving.
4. Divide total costs by the monthly saving to get your break-even point.
5. Ask your current lender for a rate review before you go, then decide whether a switch still clearly wins.

Michael and the team at Mankin Finance run this comparison for clients across Australia every week, and a good share of those reviews end with a recommendation to stay put or to negotiate. If you would like to compare options before you commit, the frequently asked questions page covers how we work, or you can start a refinance enquiry directly.