Top tips to understand refinancing costs

What Does It Actually Cost to Refinance?

Refinancing a home loan typically costs between $500 and $1,500 in application and settlement fees, plus potential discharge fees from your current lender of $150 to $400. Some lenders waive their application fees if you're borrowing above a certain amount, others don't.

Consider a carpenter refinancing a $450,000 loan to drop the rate from 6.2% to 5.5%. The new lender charges a $600 application fee and the old lender wants $350 to discharge the mortgage. That's $950 upfront. Over the first year, the lower rate saves roughly $260 per month, so the upfront cost is recovered in under four months. After that, it's pure saving.

If your existing lender is offering to match or beat the new rate, ask them to waive the discharge fee. Some will, some won't. If they won't and the rate difference is small, staying put might cost less overall. If the rate difference is significant, the discharge fee is just part of the cost of moving.

Lender Application Fees and How They're Charged

Most lenders charge an application fee between $0 and $700, depending on the loan size and whether they're running a promotion. This fee covers their cost of processing your application, ordering a valuation, and setting up the new loan account.

Some lenders advertise no application fee but load the cost into a higher ongoing rate. Others waive the fee for loan amounts above $400,000 or for borrowers refinancing from a competitor. Read the fee schedule before you assume anything. A $0 application fee on a rate that's 0.15% higher than the next option will cost you more over two years than a $600 fee on a lower rate.

If you're refinancing through a broker, they'll tell you which lenders are waiving fees and which aren't. Tradie Home Loans works with lenders who regularly waive application fees for refinances, particularly for self-employed carpenters who can show consistent income over the past two years. It's worth asking.

Discharge Fees From Your Current Lender

Your existing lender will charge a discharge fee to release the mortgage over your property. This is usually between $150 and $400, depending on the lender and whether the discharge is electronic or paper-based.

Some lenders also charge a settlement fee or an account closing fee on top of the discharge fee. These can add another $100 to $200. If you're coming off a fixed rate period early, there may also be break costs, which are a separate calculation based on the difference between your fixed rate and current wholesale rates. We'll cover that in the next section.

Discharge fees are non-negotiable with most lenders. They're a cost of doing business. If you're refinancing to save $200 per month and the discharge fee is $350, you're still ahead after two months. It's a short-term cost for a long-term gain.

Fixed Rate Break Costs and How They're Calculated

If you're leaving a fixed rate loan before the end of the fixed period, your lender may charge break costs. These are calculated based on the difference between your fixed rate and the lender's current funding cost for the remaining fixed period. If wholesale rates have dropped since you fixed, the break cost can be thousands of dollars. If rates have risen, the break cost is usually zero.

A carpenter locked in at 2.5% for four years might face break costs of $8,000 to $12,000 if leaving two years early, depending on how far rates have moved. The lender will provide a written quote before you proceed. If the break cost is high, it might make sense to wait until the fixed rate expiry date or negotiate with the new lender to contribute toward the cost.

Some lenders will offer a cash contribution of $2,000 to $4,000 to cover break costs if you're refinancing a large loan. Others won't. If your fixed rate ends in the next six months, it's often smarter to line up the refinance application now and settle the day after the fixed period expires. You avoid the break cost entirely and still lock in the lower rate.

Valuation Costs and When You'll Pay Them

The new lender will order a valuation of your property to confirm it's worth what you've declared. Most lenders include this cost in their application fee or absorb it themselves. Some charge it separately at $200 to $300.

If you're refinancing a standard residential property in a metro area, the valuation is usually a desktop review using recent sales data. If you're in a regional area or own a non-standard property like a house on acreage or a property with a large shed, the lender may require a physical inspection, which takes longer and costs more.

If the valuation comes in lower than expected and your loan-to-value ratio pushes above 80%, you may need to pay lenders mortgage insurance or reduce the loan amount. This is rare when refinancing an existing loan unless property values in your area have dropped since you bought. If you've been making extra repayments or your suburb has seen strong growth, the valuation usually confirms enough equity to proceed without issue.

Legal and Settlement Costs

You'll need a solicitor or conveyancer to handle the settlement of the new loan and the discharge of the old one. This typically costs $800 to $1,200, depending on your location and whether the transaction is straightforward.

Some lenders offer a settlement service through their panel of lawyers and quote a fixed fee. Others leave it to you to arrange. If you're also accessing equity to fund a renovation or investment, the legal cost may be slightly higher because there's more documentation involved.

In our experience, carpenters refinancing to consolidate into their mortgage or access equity should budget around $1,000 for legal fees on top of the lender and discharge fees. If your income structure is straightforward and you're just switching for a lower rate, the legal side is usually quick and the cost sits at the lower end of that range.

When the Upfront Cost Outweighs the Saving

If the total cost to refinance is $1,500 and the monthly saving is $80, it takes 19 months to break even. If you're planning to sell the property or pay off the loan in the next 18 months, refinancing doesn't make financial sense unless you're also accessing equity or consolidating debt.

Some carpenters refinance to switch from a loan with no offset or redraw to one that offers both. The upfront cost might be similar, but the ability to park income in an offset account and reduce interest daily can save thousands over the life of the loan, even if the rate is identical. That's a feature cost, not just a rate cost.

A loan health check will show you the real cost versus the real saving, including rate, features, and flexibility. If the numbers don't stack up, we'll tell you to stay put. If they do, we'll walk you through exactly what you'll pay and when.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers on your current loan, compare it to what's available now, and show you the actual cost to switch versus the saving over the next two to five years. If it makes sense, we'll handle the application. If it doesn't, we'll tell you that too.

Frequently Asked Questions