If you’re looking to get more out of your home loan, refinancing could potentially be a great option. But before you sign on the dotted line, digging into refinancing fees and costs can help you work out if you’re getting bang for your buck.

Consider these fees

There are a few refinancing fees out there, but understanding the finer details of your current or future home loan can help narrow the list. You’ll usually find these in the terms and conditions. Depending on your circumstances, the fees you could have to pay include the following:

• Break fee: if you’re still in a fixed rate interest period, you may need to pay a fee to break your fixed rate and repay the loan.
• Loan finalisation and discharge fee: you may need to pay this when closing your loan with your current lender. It’ll likely include fees to release your existing mortgage registration.
• Establishment fee: lenders can charge you a fee when you take out a new loan.
• Mortgage registration fees: you’ll need to pay to register the new mortgage with your new lender.
• Lenders Mortgage Insurance (LMI): if you have less than 20% equity in your property (the difference between your property’s value and what you owe on your loan), your new lender may charge you Lenders Mortgage Insurance – even if you’ve previously paid it for your current loan. This protects the lender in the event you default on your loan.
• Valuation fees: you may have to wear the cost if your new lender decides to conduct a valuation of your home.
• Renegotiation fee: if you refinance with the same lender you may be charged a fee.

Costs for similar types of fees can differ between lenders, so carefully read the fine print to understand what may apply to you.

Work out the finer details of refinancing

Once you’ve sorted relevant fees, consider looking into the interest payable. By comparing the interest rate on your current loan with offerings from other lenders you can get a clearer idea of potential interest savings.

There’s more to refinancing than potential interest savings, though. Alongside interest rates you’ll need to factor in product-specific features and fees. This is why it’s worth discussing with your lender or broker any costs and benefits unique to you. But if you find refinancing ends up saving you more month-to-month, it may be the way to go. And even if you do have to pay fees, you may be able to include some of them in your new loan to avoid dipping into your savings.

It might also pay to think carefully if you’re moving house in the next couple of years. Refinancing fees can add up and may offset better interest rates over the short-term, so it may be helpful to consider future plans before kicking off the refinancing process.

Refinancing with the same lender

You might think of refinancing as financially jumping ship, but did you know you can also refinance or renegotiate with your current lender?

If you don’t want to switch lenders in a hurry, let your current lender know that you’re interested in a more competitive rate. They may work with you to refinance or vary your existing loan and provide you with a better interest rate. This can be a great option if you enjoy their product offerings and don’t want the usual admin hassle that comes with refinancing with another lender. You may still need to pay a renegotiation fee, though.

How long does refinancing a home loan take?

There’s no real set timeline when it comes to refinancing. Depending on the lender and your loan, refinancing can take a few days or a couple of months. Following up with your lender should give you a clearer idea, as it’s important to not make assumptions.

Generally speaking, applying for a refinance isn’t all that different from applying for a new home loan. To help speed up the process, prepare any supporting documentation required for the lender to assess your application as early as possible. Once approved, your new lender will usually get in touch with your old lender to arrange paying out your loans and transferring your mortgage.

Keep an eye on interest rates

If an attractive interest rate pops up on the market and think you might be able to benefit, refinancing could potentially be a good idea. Just make sure you carefully consider relevant fees and costs so you end up ahead.

If you’re looking to refinance, Suncorp Bank’s professional lending experts can help you understand your options. All consultations are 100% obligation-free.

Talk to a home lending specialist

Published 26 August 2021