Guide to mortgage discharge fees in Australia
Recently seen the term ‘mortgage discharge fee’ online or in your loan documentation? Many lenders charge these fees when you want to exit your home loan. But what are they for? They cover the administrative costs of discharging your mortgage. You might also hear them called an exit fee, termination fee, or even a settlement fee (don’t confuse this with the settlement fee you pay when your loan starts!). The fees aren’t necessarily expensive, but they can be an unwelcome surprise. You’d rather not find out about one last fee just as you’re about to celebrate being mortgage-free. DiJones is a team of real estate and home loan experts in Australia. We regularly see homeowners overlook discharge fees when they reach the end of their loan period. The good news is that if you know about home loan fees and charges and how they work, you can plan for the future. That means you won’t be caught out by any costs you didn’t see coming. So, with that in mind, let’s get into it by starting with the basics. What’s a discharge fee? When will it apply to you?
What are mortgage discharge fees?
The discharge fee is the cost of exiting your mortgage. It covers filing paperwork and any other administrative tasks your lender needs to complete before you say goodbye to your mortgage.
You will probably encounter a mortgage discharge fee if you’re:
-
Paying off our mortgage. You need to pay the fee before you can remove the mortgage from your property title.
-
Selling your house. You pay the discharge fee to transfer ownership to your home buyer.
-
Refinancing your mortgage with a different lender. And so need to discharge with your existing lender.
-
Doing a security swap to transfer a mortgage from your old property to a new property. This usually applies when you sell one property and buy another.
What is the process for discharges of mortgages?
Normally, the discharge will take 10-21 days. The process will look a little something like this. Step 1: Submission You submit a mortgage discharge request form to your lender. This formally lets them know you want to discharge your mortgage. Step 2: Preparation Your lender creates and sends a discharge mortgage form for you to sign. You’ll need to fill in information such as your name, account number, and bank details. Step 3: Registration The lender (or you on rare occasions) registers this discharge with the state, removing the mortgage from your property title. Step 4: Payment You pay discharge fees and extra administrative costs. The amount depends on your state and chosen lender. You should also have documentation before you start the process to ensure the whole thing goes smoothly and quickly. Some necessary documents include:
-
Details of every borrower listed. This includes guarantors.
-
Account numbers for your home loan.
-
Bank account details (where fees need to be debited from).
-
Name of your new lender, if applicable.
-
Name of your legal representative, if applicable.
-
Contract of sale, if selling the property.
How much does a mortgage discharge fee cost?
Fees vary. Most lenders will make you pay roughly $300-$400. This is the norm, but we’ve seen costs as low as $150 or really steep at the $1000 mark. Really, the best advice is just to check your loan document. It’s the only way to know for sure.
Additional fees you might encounter
Consider any additional fees that might crop up during the discharge process. Here are a few to consider.
Government fees
Lenders must register the discharge with the state before they can remove the mortgage from your property's title. State governments may charge you extra for these administrative costs. Every state is different, so to help with this, here are the additional administrative discharge fees you should budget for depending on where you live. You can also find links below to each relevant page to learn more about your state's specifics.
|
State |
Additional mortgage discharge fee |
|
VIC |
$118.90 |
|
QLD |
$224.32 |
|
NSW |
$165.40 |
|
SA |
$179.00 |
|
WA |
$203.00 |
|
TAS |
$180.20 |
|
NT |
$165.00 plus $64 per additional title |
|
ACT |
$166.00 |
Solicitor support
Mortgage discharge fees can be complex. That’s true, especially if you aren’t familiar with your loan documentation. You could, in that case, get some support from a solicitor to help you out.
Solicitors will handle the whole process from start to finish. Hiring one will reduce headaches. Just remember to factor agent fees into your budget.
Additional fees
You may also need to pay extra if you’re breaking a fixed-rate home loan or currently owe any penalty interest.
Tips for reducing mortgage discharge fees
Now for the good news. It is entirely possible to reduce your discharge fees. That said, if you’re already locked into a contract, this might be easier said than done, so the best time to find good discharge fees is before you sign any agreements. Still, easier said than done doesn’t mean impossible. Here are a few strategies you can use to reduce or, in some cases, even waive your costs. 1. Negotiate Negotiating with a lender won’t always be easy. Still, if you’ve consistently paid on time, you can then discuss the possibility of your loan being reduced or waived. This approach works well, especially if you’re switching to another product with the same lender. 2. Compare home loans Take a good look at your loan documentation before you pick your lender. Some lenders may require really steep fees that could leave you out of pocket down the line. Instead, pick a lender that offers low or no discharge fees. 3. Check the small print on home loan interest rates Check for break fees before you commit to a fixed-rate home loan. This will let you know exactly how much you’ll expect to pay if you decide to break early. If a loan option is too steep, shop for a better one. 4. Keep up with your payments Arrears are bad news when you’re paying your discharge fee. You might have to pay more when you break with your mortgage if you’ve been consistently making late payments. Pay everything on time, even if it’s just a small amount. Aside from ensuring you don’t encounter unwanted fees, this will also help with negotiations.
Legal considerations
Mortgage discharge fees can be pretty confusing. You want to make the transition quickly but don’t want to be hit with unexpected fees. For that reason, you could get a professional involved who can help with the legal side of things. A solicitor will help you understand your rights and let you know your obligations. They’re the ideal way to make the discharge straightforward - just be sure to factor in the additional costs of buying a solicitor into your budget.
Frequently asked questions
What does discharge mean? With home loans, discharge is a fancy way of saying ‘ending’ your mortgage. You’re charged a discharge fee when you do just that. Ending in this context can mean anything from making your final home loan repayment to refinancing or selling your home. What are the costs of discharging a mortgage? You’ll normally need to pay around a $300-$400 mortgage discharge fee to your lender to cover administrative costs. This can, however, rise to around $1000 or be as low as $150, depending on who your mortgage is with. You’ll also need to consider break costs for fixed-rate home loans and any penalty interest due. Plus, your local government may impose extra administrative charges for registering your Discharge of Mortgage and Registration of Title. How to avoid mortgage discharge delays? Have all of your paperwork ready before you start the process. There’s no bigger timewaster than trying to gather the details of borrowers and contracts at a moment’s notice. Also, consider employing a solicitor to speed up the process and avoid any headaches with terms and conditions. Do I need to pay stamp duty on mortgage discharge fees? No, home buyers do not need to pay stamp duty on mortgage discharge fees and charges. Mortgage discharge is an exit fee charged by lenders when you pay off or refinance your mortgage. This fee cost is separate from the stamp duty calculated, which is a government fee paid when transferring property ownership. Break costs associated with terminating a home loan product early may also apply, but these bank account debits are also distinct from stamp duty. Can I avoid paying a mortgage discharge fee? It may be possible to avoid paying a mortgage discharge fee in some situations, but it depends on your lender and the terms of your loan. Here are a few points about avoiding mortgage discharge fees when refinancing your home loan, whether for variable home loans or term deposits:
-
Some lenders will waive or discount the discharge fee, especially if you are refinancing with them to a new loan product.
-
Lenders may offer promotional waivers or discounts on discharge fees as incentives to new customers.
-
If the loan is relatively new, you may be able to negotiate to waive the discharge fee, especially if you are paying off the loan due to selling the property and paying associated costs like valuer fees, title searches, and registration fees.
-
Lenders are sometimes more willing to waive discharge fees for loans closer to the end of their term
When do I pay the mortgage discharge fee? You will need to pay a mortgage discharge fee in a few different situations:
-
When you sell your house or property that has a mortgage.
-
When you switch to a new lender and refinance your existing mortgage with them.
-
When you have fully paid off the entire amount you owed on your home loan
The mortgage discharge fee covers the administrative costs for the lender to remove the mortgage from your property's title and release their legal claim over the home.
Do all lenders charge the same discharge fee amount?
No, not all lenders charge the same mortgage discharge fee, and the fee can vary greatly between lenders. When refinancing, do I pay a discharge fee on both loans? When refinancing your mortgage, which involves switching to a new lender with a potentially lower home loan interest rate, you will typically need to pay two loan discharge fees. First, your current lender will charge you a termination fee for removing the existing mortgage, and then the new lender will charge you another fee for registering the new mortgage. This is because loan repayment to the old lender and setting up the new loan are separate processes with associated fees and charges. Can the discharge fee change after closing on my mortgage? The initial fee amount is stated in your original paperwork, though lenders may update their fees and charges over time. It's advisable to check with your lender or mortgage brokers directly before making any additional repayment or loan discharge to confirm the current fee. Factors like having an advantage package, low rate pricing, or accounts for margin lending or money transfer could impact the discharge fee. So don't assume it's the same amount quoted years ago when you closed on the mortgage. Verifying the up-to-date fee ensures you have accurate final loan repayment costs.
Summing up
Mortgage discharge fees don’t have to be a hidden surprise for Australian homeowners. Take the time to understand your loan documentation and consider any additional costs you may need to shoulder. Do that, and you’ll have all the pieces in place to plan ahead and budget for your discharge fee well in advance. Need more support? DiJones can help. If you want to ask any further questions about this article, reach out today. We’ll be happy to have a chat about your options. You can connect with us here or visit our blog to read more of our insightful guides.
