How much does it cost to refinance a home loan?

Mortgage refinancing is a popular option for homeowners who are looking to save money on their monthly mortgage payments or to access the equity in their home. But how much does it cost to refinance a home loan?

One cost to consider is a "break cost." This is a fee that your lender may charge you if you're exiting leave a fixed rate home loan early. The break cost is essentially the difference between the interest rate that would have applied to your remaining fixed rate period if you chose to switch or pay off all or part of your loan, and the interest rate that applied when you first began your fixed rate period. We refer to this as the 'difference in wholesale interest rates'. 

Break costs can be quite substantial in an environment where rates have dropped (ie not now in 2023) and are relative to the original amount you borrowed. The calculation itself is not simple (but banks make it unnecessarily complex imo) and you won't find many calculators on the web with a definitive answer to how much you owe. The best way to find out how much your break fee will be is to ask your mortgage broker.

Another cost to keep in mind is a "discharge settlement fee." This fee is charged by the lender to cover the cost of admin when you exit a loan. It can apply to both variable and fixed rate home loans.

When it comes to refinancing and taking out a new loan, there are also some up-front costs to consider. This can include an "application fee" or "establishment fee" to cover the admin cost of setting up a new loan. Some lenders, like Westpac, waive this fee. Additionally, you may need to pay a property valuation fee for a new lender to get an accurate picture of your equity. Some lenders include this in the application fee.

Additionally, you may need to pay a "settlement fee" if there are legal costs in settling a new home loan with the lender. Finally, you'll need to register your new mortgage with state or territory government, which will come with a "mortgage registration fee" that varies depending on location.

Broadbeach Mortgage Brokers simplify the process of refinancing your mortgage by handling all of the paperwork and communication with lenders on your behalf. This means that you won't need to spend time researching different lenders or comparing rates - you won't even need to talk to your existing lender.

The broker will work with you to understand your financial goals and needs, and then use that information to find the best refinancing options for you. They will also help you to gather all the necessary documentation, such as proof of income and property value, to ensure that your application is complete and accurate.

Once your application is submitted, the broker will follow up with the lender and keep you updated on the status of your application. They will also answer any questions you have and help you to understand the terms of your new loan.

Overall, working with a mortgage broker like Broadbeach Mortgage Brokers can save you time and reduce the stress of refinancing your mortgage. They will help you to find the best loan for your needs and guide you through the process from start to finish.