Refinance / Restructuring
Fees And Costs Of Refinancing
5 min read- Finance Guide
- Updated 2026
Quick answer
Refinancing replaces your
Switching Costs
Can include several separate fees
- Biggest risk item Fixed break cost
- Common lender fee Discharge + setup
- Decision test Total savings vs cost
1300 421 044
1300 421 044
Detailed explanation
Refinancing costs can be straightforward or surprisingly expensive depending on the loan. Some borrowers face only modest setup and discharge costs. Others encounter substantial fixed rate break costs, legal and settlement expenses, or a longer loan term that increases the total interest paid even if the new rate looks lower. That is why a cost focused refinance review should always examine the full dollar outcome, not just the advertised rate.
Common refinance cost categories
The cost side of a refinance often includes:
-
Discharge or settlement fee on the outgoing loan
-
Application, settlement or establishment fee on the incoming loan
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Valuation, credit and processing costs
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Government registration or settlement charges where applicable
-
Possible legal or document preparation costs
-
Ongoing package fees or offset account charges
Moneysmart warns borrowers to make sure the benefits of switching outweigh the costs. That matters because upfront refinance charges can erase the value of a lower rate if the loan is not held long enough.
What affects the total cost
The overall cost of refinancing is shaped by factors such as:
Whether the current loan is fixed or variable- The size of the current loan balance
- Whether a new valuation is required
- Which lender and product are chosen
- Whether offset, package or annual fees apply
- Whether the refinance includes cash out or debt consolidation
- How long the borrower expects to keep the new loan
A refinance only makes commercial sense when the total cost of switching is lower than the expected savings over a realistic holding period
Why low fees do not guarantee a good outcome
A lender may promote a low rate or low application fee, but that does not mean the refinance is automatically worthwhile. Borrowers still need to account for break costs, valuation fees, discharge charges, annual package fees and the possibility that stretching the term increases total interest over time.
Cost test before switching APRA requires lenders to assess repayment capacity using a serviceability buffer of 3 percentage points above the loan rate. That means a refinance may involve costs and still fail approval if the borrower no longer meets current policy.
What fees and costs can apply
Refinancing can involve multiple upfront and ongoing costs, with fixed rate loans often creating the largest risk of an uneconomic switch
Common costs include:
Discharge or mortgage release fee- Registration, settlement or legal costs where applicable
- Application, settlement or establishment fee
- Fixed rate break cost or economic cost
- Valuation fee and possible package charges
Lender and regulator note
Westpac and NAB both identify break costs as a key refinance risk for fixed loans, and NAB separately lists a mortgage discharge fee on its current fees and charges pages. Moneysmart also warns borrowers to compare switching costs against the likely benefit before refinancing.
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Common Cost Problems
Refinance decisions often go wrong when borrowers compare only the headline interest rate and fail to measure the full dollar cost of moving the loan.
The upfront costs absorb the savings
A refinance can look attractive on paper but still fail commercially if break costs, discharge fees and setup charges consume the benefit.
Possible solutions include:
- Compare total switch cost against projected savings
- Calculate the breakeven period before committing
- Review ongoing annual or package fees as well
- Keep the new term aligned with the intended payoff strategy
Moneysmart specifically warns borrowers to make sure the benefits of switching outweigh the costs.
Break costs make the refinance uneconomic
Leaving a fixed loan early can generate a break cost large enough to wipe out the financial benefit of a lower new rate.
Possible solutions include:
- Obtain a current break cost quote first
- Compare that figure against realistic savings
- Review whether timing the switch later improves the outcome
- Separate product desire from actual cost benefit
Major lenders state that break costs can apply when a fixed rate loan is repaid or changed before the fixed period ends.
Ongoing fees are overlooked
Borrowers sometimes focus on upfront costs and overlook annual package fees, offset charges or feature costs that continue after settlement.
Possible solutions include:
- Review the ongoing fee schedule, not just upfront fees
- Check whether the offset or package benefits justify the cost
- Compare comparison rate and total annual expense
- Consider whether a simpler product provides better net value
The cheapest looking product is not always the cheapest one to keep.
Steps to assess refinance costs
Step
01
Check the current loan balance, rate type, remaining term and any fixed rate obligations.
Step
02
List every likely switching cost including break costs, discharge fees and valuation charges.
Step
03
Estimate the new rate, repayments, ongoing fees and likely savings.
Step
04
Calculate the breakeven point and compare total cost over a realistic holding period.
Step
05
Confirm that the refinance still meets current servicing and policy requirements.
Step
06
Proceed only if the new structure improves the overall position after fees and costs.
Speak with a refinancing cost specialist.
Refinancing is rarely just about the headline rate.
The right decision depends on the full cost stack including break costs, discharge charges, new lender fees, valuation expenses, ongoing package fees and the length of time you expect to keep the new loan. A proper review can show whether the refinance is likely to save money or simply reshuffle costs.
Speak with a refinance specialist about your loan costs.
Submit the short form below and a refinance specialist will review your current loan, likely switching costs and possible refinance options.
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