What does refinancing actually cost? The full list

Refinancing ads talk about the savings. Fair enough — the savings are often real. But the honest comparison includes the costs of switching, because a lower rate that takes four years to pay back its own switching costs may not be the win it looks like. Here’s the complete cost list.

Costs from your current lender

• Discharge fee — an administration fee for closing the loan, commonly a few hundred dollars.
• Break costs — the big one, and only if you’re exiting a fixed rate early. Break costs compensate the lender for the difference between your fixed rate and current market rates, scaled by your balance and remaining term. Depending on how rates have moved, this ranges from zero to many thousands. Always get a payout quote before committing.

Government charges

• Mortgage discharge registration and new mortgage registration — state fees, typically a few hundred dollars combined.

Costs with the new lender

• Application/establishment fee — often waived in competitive offers, but check.
• Valuation fee — frequently free for standard properties, payable for unusual ones.
• Ongoing fees — an annual package fee is common on loans with offset accounts. It buys features, but it belongs in the comparison.

Offsets to the costs

• Cashback offers — lenders periodically offer cash incentives to refinancers. Treat them as a reduction in switching costs, not a reason to switch: a slightly higher ongoing rate outlasts a one-off payment quickly.
• The reprice option — sometimes your current lender will drop your rate simply because you (or your broker) formally asked. Zero switching costs, ten minutes of effort. Any refinance analysis should try this lever first.

The break-even calculation

The maths is simple and worth doing properly:

1. Total the one-off switching costs.
2. Calculate the monthly saving at the new rate (on the same remaining term — see below).
3. Divide. That’s the number of months until you’re genuinely ahead.

If break-even lands within a year or so and you plan to keep the property, the case is usually strong. If it stretches past several years — or past the point you may sell — think again.

The term trap

One subtlety catches people: refinancing a loan with 24 years remaining into a fresh 30-year term drops your repayment, but part of that “saving” is just stretching the debt. For an honest comparison, match the new loan’s term to your current remaining term, or keep repayments at the old amount so the extra goes straight to principal.

Where a broker fits

We run this whole calculation — payout quotes, fees, break costs, reprice attempt, like-for-like terms — and show you the break-even in plain numbers. Sometimes the answer is “switch”. A respectable amount of the time it’s “stay, on the better rate we just negotiated”. Both are wins.

This article is general information only. Fees vary by lender, state and loan; break costs change daily with market rates.