Refinancing a home loan may feel like a costly endeavour not worth the trouble, but new research from RateCity shows that a borrower taking advantage of cashback deals may break even before they’ve made their first new mortgage repayment.
One of the biggest perceived barriers to refinancing a home loan is the assumed upfront cost involved. However, with a range of lenders putting competitive cashback deals on the table, borrowers may be able to cut down this cost and get on top of their debt faster.
According to the RateCity database, these are the current smallest, largest and average costs of refinancing fees a borrower may face.
Refinancing costs
| Smallest (Excl. $0 fee) | Largest fee | Average (Excl. $0 fee) | |
| Settlement fee | $60 | $630 | $195.20 |
| Discharge fee | $75 | $895 | $305.75 |
| Application fees | $140 | $995 | $500.63 |
| Legal fees | $150 | $700 | $327.52 |
| Total upfront fees | $140 | $1,564 | $583.41 |
Source: RateCity.com.au. Data accurate as of 22.03.2021. Excludes $0 results. Additional refinancing costs, such as lender's mortgage insurance, will depend on an individual's mortgage.
Keep in mind that a range of home loan lenders not only charge $0 for these fees, but many be willing to pay for a borrower’s settlement and discharge fees and/or waive upfront costs to get new customers on to their books.
While the larger of these costs may feel intimidating, the savings a borrower may earn by refinancing to a lower rate and/or lower fee mortgage are considered to outweigh these costs after a number of years, generally speaking.
The real cost of refinancing a mortgage
With a high number of cashback deals on offer for refinancers, the cost of refinancing your mortgage may be more affordable than expected.
RateCity crunched the numbers on how much a borrower refinancing to a big four bank’s 3-year fixed rate may pay in upfront fees.
Big four bank lowest fixed rate loans – fees
| Cost | CBA | Westpac | NAB | ANZ | Average |
| Application fee | $0 | $0 | $0 | $0 | $0 |
| Settlement fee | $200 | $0 | $0 | $0 | $50 |
| Valuation fee | $0 | $0 | $0 | $0 | $0 |
| Legal fee | $0 | $0 | $0 | $0 | $0 |
| Annual fee | $395 | $395 | $395 | $395 | $395 |
| Discharge of pre-existing mortgage registration fee | $143.50 | $143.50 | $143.50 | $143.50 | $144 |
| NSW - Mortgage Registration fee | $143.50 | $143.50 | $143.50 | $143.50 | $144 |
| NSW - Title Search fee | $20 | $20 | $20 | $20 | $20 |
| Discharge fee from previous lender | $350 | $350 | $350 | $350 | $350 |
| Total cost of refinancing without cashback | $1,252 | $1,052 | $1,052 | $1,052 | $1,102 |
| Cashback | -$2,000 | -$3,000 | -$2,000 | -$3,000 | -$2,500 |
| Total cost of refinancing | -$748 | -$1,948 | -$948 | -$1,948 | -$1,398 |
Note: Big four bank’s lowest rates are package rates that have an annual fee of $395. Government fees are based on refinancers in NSW. The title search fees are estimates only and can often range from between $10 - $30. Title search fees are averaged as figures slightly differ across the market. Data accurate as of 22.03.2021.
A borrower looking to refinance to a big four bank’s 3-year fixed rate may be looking to pay $1,102 on average in upfront fees.
But when you factor in cashback deals on offer, the borrower may be ahead before they begin, even before you factor in the savings from a lower interest rate. In fact, when you include the cashback offer, the average new customer is $1,398 better off from refinancing.
What cashback deals are available?
Ratecity research found that 23 lenders are currently offering cashback deals ranging between $1,500 and $4,000.
Interestingly, most cashback deals are specifically for refinancers, indicating that banks are targeting borrowers hoping to take advantage of the current low-rate environment as potential new customers.
Home loan cashback deals on offer
| Lender | Cashback value |
| ANZ (broker only) | $ 3,000 |
| CBA | $ 2,000 |
| NAB | $ 2,000 |
| Westpac | $ 3,000 |
| Reduce Home Loans | $ 5,000 |
| Bank of Melbourne | $ 4,000 |
| BankSA | $ 4,000 |
| People's Choice Credit Union | $ 4,000 |
| RAMS | $ 4,000 |
| St.George Bank | $ 4,000 |
| HSBC | $ 3,288 |
| Bank of Queensland | $ 3,000 |
| P&N Bank | $ 3,000 |
| Virgin Money | $ 3,000 |
| Credit Union SA | $ 2,500 |
| Bank of China | $ 2,288 |
| Bankwest | $ 2,000 |
| CUA | $ 2,000 |
| MyState Bank | $ 2,000 |
| Newcastle Permanent | $ 2,000 |
| Police Bank | $ 2,000 |
| 86 400 | $ 2,000 |
| BankVic | $ 1,500 |
Source: RateCity.com.au. Data accurate as of 22.03.2021.
Note: Reduce Home Loans is offering $5,000 cashback for home loans of $1+ million. All big four banks are offering cashback deals (ANZ through a broker). Most cashbacks are for refinancers only.
Keep in mind a borrower will still need to meet the eligibility criteria set by a new lender to be approved for a cashback deal on a refinancing loan, including a good credit score and meeting minimum income requirements.
There is more to a home loan than the cashback deal on offer. You will still want to consider the interest rate, fees, features and other factors of a mortgage before refinancing. Comparison tables and calculators may be helpful in allowing borrowers to compare apples with apples and view how different loan options and their repayments stack up, side by side.
Company | Product Discount Home Loan Real Time Rating™ | Interest Rate  2.68 % p.a Variable | Comparison Rate* 3.13 % p.a | Repayment $1,373 monthly | Real Time Rating™ | Go to site | Cashback Receive a cashback of $3000 ~ Ends in 5 days |
Company | Product Back to Basics Home Loan Special Offer Real Time Rating™ | Interest Rate 2.72 % p.a Variable | Comparison Rate* 2.73 % p.a | Repayment $1,379 monthly | Real Time Rating™ | Go to site | Cashback Receive up to $4,000 cash when you take out an eligible Suncorp Bank home loan. Receive either $3K by taking out a Suncorp Bank home loan of $750K+ or $4K by taking out a Suncorp Bank home loan of $1m+ with LVR ≤90%. Apply by 30 November 2022, settle by 28 February 2023. Unless withdrawn prior. T&Cs & eligibility criteria apply. ~ Ends in 5 months |
Company | Product Premier Home Loan Real Time Rating™ | Interest Rate 2.94 % p.a Variable | Comparison Rate* 2.94 % p.a | Repayment $1,413 monthly | Real Time Rating™ | Go to site | Cashback Get $2,500 cashback when you refinance your home loan ~ Ends in 6 days |
Company | Product Special Residential Real Time Rating™ | Interest Rate 2.89 % p.a Variable | Comparison Rate* 2.95 % p.a | Repayment $1,406 monthly | Real Time Rating™ | Go to site | Cashback Refinance your home or investment property and get $3000 as cashback* |
