Unlock the Secrets to Refinancing Costs & Savings

Refinancing costs typically range from $500 to $3,000 depending on your lender, loan amount, and whether you need a new property valuation.

The upfront expense is only part of the calculation. What matters is whether the ongoing saving or feature improvement justifies the initial outlay. For dentists who've come off a fixed rate period or need to access equity, the comparison becomes concrete once you factor in how long it takes to recover those costs through a lower monthly repayment.

What You Actually Pay When You Refinance

Refinancing involves application fees, valuation fees, discharge fees from your current lender, and registration fees for the new mortgage. Application fees vary from zero to around $600. Valuation fees depend on property type and location but usually sit between $200 and $400 for a standard residential property. Your existing lender charges a discharge fee, typically $150 to $400, to release the mortgage. Registration of the new mortgage costs around $150 to $200 depending on the state.

Some lenders waive application fees or offer cashback incentives that offset these costs. Others bundle certain fees into the loan amount so you don't pay upfront but end up paying interest on them over the life of the loan. If you're refinancing to a lower rate and the interest saving exceeds the cost within 12 to 18 months, the switch makes financial sense.

When Break Costs Add Thousands to the Bill

If you're locked into a fixed rate that hasn't expired, breaking that loan early triggers break costs. These aren't fixed fees but calculated based on the difference between your fixed rate and the lender's current wholesale funding cost for the remaining fixed period. If rates have fallen since you fixed, break costs can reach several thousand dollars. If rates have risen, break costs may be zero or minimal.

Consider a dentist who fixed at 2.5% three years ago and still has 18 months remaining. If the lender's current wholesale rate for that period is 4%, there's no break cost because the lender isn't losing money by releasing you early. But if wholesale rates dropped to 1.8%, the lender calculates the lost interest over 18 months and charges that amount upfront. In our experience, dentists coming off fixed terms wait until expiry unless accessing equity or consolidating debt justifies the break cost.

How Long It Takes to Recover Refinancing Costs

Recovery time depends on the interest rate difference and your loan amount. If you're moving from a 6.2% variable rate to a 5.8% rate on a $600,000 loan, the monthly saving is roughly $140. With total refinancing costs of $1,500, you recover the outlay in about 11 months. After that point, the saving continues for as long as the rate advantage holds.

If you're refinancing primarily for features like an offset account rather than a rate reduction, the recovery calculation shifts. An offset account linked to your operating account can save significant interest if you regularly hold funds between billing cycles. For a dentist with $30,000 sitting in an offset against a $500,000 loan at 6%, the annual saving is around $1,800. That covers most refinancing costs within the first year and compounds over time as you maintain higher balances during peak income periods.

Accessing Equity and How That Changes the Cost Picture

If you're refinancing to release equity for an investment property deposit or practice fit-out, the cost structure includes everything mentioned above plus the interest on the additional amount borrowed. Lenders revalue your property as part of the application. If your home has increased in value and your existing loan has reduced, you may be able to borrow an additional amount while staying within acceptable loan-to-value ratios.

As an example, a periodontist bought in Brisbane's inner west several years ago. The property was revalued during refinancing and showed enough equity to access $120,000 for a deposit on an investment property. The refinancing costs totalled $2,200 including valuation and discharge fees. The new loan had a slightly lower rate than the old one, and the equity access meant the refinance delivered both immediate funds and ongoing savings. The costs were absorbed into the new loan amount, and the monthly repayment increase was offset by rental income from the investment property within six months.

What Happens If You Refinance Again Within Two Years

Some lenders include clawback clauses that require you to repay cashback incentives or fee waivers if you refinance again within a set period, usually two years. If you accepted a $2,000 cashback offer and then refinance 18 months later, you may need to repay that amount to the original lender. Discharge fees still apply, so you're paying to leave twice in a short window.

This becomes relevant for dentists who refinance when their fixed rate period ends and then want to refinance again shortly after to access equity or move to another lender. It's worth checking your loan contract for clawback terms before committing to a second refinance. If you know you'll need equity access within the next year or two, structuring the first refinance to include that equity upfront avoids double costs.

Discharge Fees, Settlement Timing, and Interest Overlap

Your existing lender charges interest up to the day the loan is discharged. Your new lender charges interest from the day the loan settles. If settlement is delayed or occurs mid-month, you may pay interest to both lenders for a few days. It's not a large amount but should be factored into the total cost, particularly if settlement falls during a billing cycle where your offset balance is low.

Discharge fees are non-negotiable and set by your current lender. Some lenders process discharges within a few business days. Others take two weeks. Coordinating settlement so the new loan funds on the same day the old loan discharges avoids double interest. Your solicitor or conveyancer manages this timing, but it's worth confirming the schedule during the refinance application so there's no gap.

Whether Refinancing Costs Are Tax Deductible

If you're refinancing an investment loan, the costs associated with that refinance are generally tax deductible over five years or the loan term, whichever is shorter. This includes application fees, valuation fees, and discharge costs. If you're refinancing your owner-occupied home, those costs aren't deductible even if part of the refinance involves accessing equity for investment purposes. Only the portion of costs directly related to the investment component can be claimed.

For dentists using debt recycling strategies or refinancing to fund practice acquisitions, it's worth discussing the deductibility of refinancing costs with your accountant before proceeding. In some structures, the way the loan is split between owner-occupied and investment purposes affects how much of the cost can be claimed. Getting that structure right during the refinance avoids having to restructure later.

Refinancing delivers the most value when the cost is recovered quickly and the new loan aligns with your income pattern, property plans, and borrowing structure. If your current loan no longer suits your circumstances or you're paying more than necessary, the cost of switching is usually justified within the first year. Call one of our team or book an appointment at a time that works for you.

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