Short answer
Refinancing costs more than the legal or application fee. Add any break cost, contribution clawback, valuation, legal work, discharge fee, package fee, low-equity margin, and interest difference over the period you expect to keep the new loan.
Worked example: Nina is downsizing, not just chasing a rate
Nina is preparing to move to a smaller property while helping an elderly parent. She has $520,000 remaining with Quiet Pocket Bank and six months left on a fixed term. BGF Bank offers a lower new-customer rate, but Nina may sell and repay part of the loan within two years. Her comparison needs a break-cost estimate, contribution conditions, setup costs, new balance, and the cost of changing again.
Costs from leaving and setting up
Check break costs, incentive repayment, discharge fees, legal and registration work, valuation costs, application or package fees, new account fees, and any low-equity pricing adjustment. Also check whether the new structure gives up an offset, revolving facility, or useful repayment flexibility.
A worked break-even example
Nina's refinance saves $180 a month. Her switching costs are $1,900 and the current lender estimates a $2,400 break cost. A $3,000 contribution is conditional on keeping the loan for three years. Before considering the contribution, $4,300 of costs takes about 24 months to recover. If Nina sells in month 18 and must repay the contribution, the apparent saving may disappear.
What can change the result?
The written break-cost estimate, contribution trigger, new lender's LVR and DTI assessment, income and expense evidence, property requirements, remaining term, loan balance, and any loss of useful flexibility can all change the decision.
How can a broker help?
A broker may request a comparable offer, identify likely lender fit, check incentive conditions, and coordinate the application. Ask which lenders are on the panel, how the adviser is paid, what fees apply, and for disclosure information. You can also ask your current bank for a retention offer.
What should you ask before refinancing?
Ask for the current lender's written break-cost estimate, confirm whether any contribution is repayable, list all legal and valuation costs, check whether the new term is reset, and ask whether the new lender will reassess LVR, DTI, income, expenses, and property evidence.
Evidence categories to organise
- Break-cost estimate
- Contribution clawback
- Discharge fee
- Legal and valuation costs
- New lender assessment
- Remaining term
- LVR and DTI
- Expected time with new lender
This guide is general information only. MoreGage does not provide regulated financial advice, a lending assessment, approval, or an offer.