What is a Mortgage Discharge Fee? | RateCity

A discharge fee is paid when you finish paying off the balance on a loan, or refinance with another lender.

Some lenders use the terms termination fee or settlement fee interchangeably with discharge fee.

A discharge fee is intended to cover the lender’s legal and administration costs when they wrap up your home loan with them.

A break fee is a type of discharge fee that applies when you pay off or refinance a fixed home loan during the fixed rate period. Sometimes called early discharge fees, the cost of break fees is often based on how long was left to go on the fixed rate period, and how much interest you would have paid to the lender during this time.

Discharge fees are not the same as exit fees, which were banned in June 2011. While exit fees could be for any amount a lender chose to charge, effectively penalising borrowers for switching home loans, the law now states that discharge fees cannot exceed a lender’s losses from a borrower ending their loan early.