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Refinancing your home loan – what does it cost?

Refinancing your home loan

If you’re trying to find ways to save money, are looking to renovate, or have a few other debts you want to combine into one monthly payment, you might be considering refinancing your home loan. Refinancing can be a good option in some situations, but it’s important to be aware that refinancing does come with some associated fees and costs.

Why refinance?

People choose to refinance their home loan for various reasons, such as consolidating debts and using the equity in their home for a renovation or other big purchases. Other times, borrowers might choose to refinance to get a better deal on their home loan or switch to a loan that offers more features than their existing loan.

Whatever your reasons for refinancing, it’s essential to do your homework and make sure it’s the right decision for you. 

How does refinancing your home loan work? 

Whether you’re refinancing with your existing lender or with a different lender, you will need to submit an application and provide supporting documentation to prove your income and expenses. 

Be aware that refinancing may affect your home loan term. For example, if you started with a 30-year home loan and refinanced after five years to another 30-year loan, you’re effectively adding five years to your loan, which will mean you pay more in interest over the long term. It’s important to balance this against any potential cost savings from refinancing. 

Costs involved in refinancing your home loan

Costs and fees vary between lenders and different loan products, but as a rule, you can expect to pay some or all of the following costs when you refinance:

  • Application fee: Sometimes known as an establishment fee, the application fee is a one-off payment to cover the cost of setting up your new loan. 
  • Settlement fee: The settlement fee covers the legal costs of settling a new home loan with the lender. You may also be charged a discharge settlement fee from your existing lender to cover the cost of administration and work involved in closing your loan. 
  • Mortgage registration fee: This is paid to the state or territory government for registering a new mortgage for the property and varies depending on the location.
  • Valuation fees: Your lender may require you to get a property valuation, especially if you’re planning to borrow against the equity in your property. This means you may need to pay valuation fees. 
  • Break fees: This cost applies if you are on a fixed rate home loan. In many cases on this type of loan, you’ll have to pay an early exit fee if you leave before the end of your fixed rate term. 
  • Lenders mortgage insurance (LMI): If you’re borrowing over 80% of the total value of your property, you may need to pay LMI when you refinance. Not all lenders charge LMI – at Bluestone, we don’t, so always check carefully as LMI costs can be significant in some cases. 

Should you refinance with your existing lender?

If you’re considering refinancing, it might be worth speaking to your existing lender as they may be able to offer you a better rate, especially if you’ve made all your repayments on time. In addition, refinancing with an existing lender may be more convenient as they already have your information and know your history. 

Refinancing is a big decision, and it’s essential to consider it carefully to make the best decision for your financial circumstances. To find out more about refinancing with Bluestone, speak to our customer support team today. 


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