Refinancing Your Home or Business: Understanding Exit Costs
Refinancing your home or business loan can be a strategic way to secure better terms, reduce monthly payments, or access equity for investments. However, before making the switch, it’s essential to consider the costs involved to ensure refinancing truly benefits your financial goals.
Why Refinancing Can Be Beneficial
Many borrowers refinance to take advantage of lower interest rates, consolidate debt, or change loan structures. While these are great reasons, hidden fees can impact your savings. Let’s explore the key exit costs associated with refinancing.
Key Exit Costs to Consider
1. Establishment Fee
Also called application, up-front, or set-up fees, these charges cover the lender’s cost of preparing documents for your new loan. Some lenders waive this fee in exchange for higher ongoing charges.
💡 Related Read: Understanding Comparison rates
2. Mortgage Discharge Fee
This fee covers the legal process of releasing you from your previous mortgage obligations. Also known as a settlement or termination fee, it compensates lenders for lost revenue due to your contract break.
3. Exit Fee
If your loan was taken out before 1 July 2011, you might still be subject to exit fees, also known as early termination or early discharge fees. Some lenders may cover this cost, but many require borrowers to pay upon contract exit.
4. Lender’s Mortgage Insurance (LMI)
LMI is non-transferable, meaning if you refinance with less than 20% equity, you may need to pay it again—even if you already paid for it on your initial loan. If your property’s value has declined, LMI could be applicable even if it wasn’t required originally.
💡 Learn More: What Is Lenders Mortgage Insurance?
5. Stamp Duty
If refinancing involves increasing your loan amount—such as funding renovations—stamp duty applies to the difference between your original and refinanced loan balance. Stamp duty rules vary by state, so speaking with a mortgage broker in Sydney is advised to confirm applicable charges.
💡 Explore Stamp Duty Rates in NSW: Revenue NSW
6. Other Government Charges
Government fees for mortgage registration and deregistration ensure all property claims are recorded properly. These charges differ by state and could add up to $1,000 or more.
7. Break Fee for Fixed Loans
Fixed-rate borrowers may face a break fee when exiting a loan early. The fee depends on your remaining loan balance, locked-in interest rate, and current market fluctuations.
💡 Related Resource: Fixed vs. Variable Home Loans
Making an Informed Refinancing Decision
Before refinancing, calculate the total costs, compare lenders, and seek professional advice. At CBM Mortgages, we help Sydney homeowners and businesses navigate refinancing, ensuring you secure the best loan for your financial situation.
📞 Speak to an Expert Today
Considering refinancing? Contact CBM Mortgages for expert guidance tailored to your needs.
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Written by Craig McDonald 13/06/2025
