When you decide to pay off your home loan, whether by fully repaying it, refinancing, or selling your property, you may be surprised by the mortgage discharge fees that come with closing your loan. Mortgage discharge fees can often surprise homeowners, but they are a necessary part of finalising your home loan and ensuring a smooth transition when refinancing, selling, or paying off the loan.
Understanding what these fees are and how they work will ensure you aren’t left with unexpected costs when you’re looking to settle your loan.
At Stryve Finance, we understand that home ownership can be complex, especially when it’s time to exit a loan. In this article, we’ll explain everything you need to know about loan discharge fees and how to manage or avoid them so that you can navigate the end of your mortgage confidently.
What is a Mortgage Discharge Fee?
A mortgage discharge fee is a charge applied by lenders when you end your home loan. Whether you’re paying off your loan in full, selling the property, or refinancing with a new lender, this fee covers the administrative and legal work required to remove the lender’s claim from the property title.
When you take out a home loan, your lender holds a legal interest in your property until the debt is repaid. When you take out a home loan, your lender places a legal claim, called a mortgage lien, on the property as collateral for the loan. This lien ensures that the lender can recover their investment if the loan is not repaid.
Once the loan is fully repaid, the lender must go through the process of discharging the mortgage, which involves notifying the relevant authorities, such as the Land Titles Office, and ensuring that their interest is officially removed from the property.
The discharge fee mortgage is the cost of this process. It’s designed to compensate the lender for the work involved in discharging the loan and updating the land title records, ensuring that the property title is clear for future transactions.
Tip:
Always check with your lender about the discharge fee before you pay off your mortgage, so you’re prepared for the cost.
Why Do Lenders Charge a Mortgage Discharge Fee?
Lenders charge a home loan discharge fee to cover the costs associated with the legal and administrative tasks involved in removing their claim on your property. When you pay off your mortgage or refinance with a new lender, the lender must ensure that their legal interest in your property is formally discharged.
This process includes:
- Administrative Work: The lender must prepare and process the necessary paperwork to officially release their claim on the property title.
- Legal Checks: The lender must ensure that the property is free from any encumbrances or issues that could prevent the property from being discharged.
- Filing with the Land Titles Office: In most cases, the lender submits the discharge documents to the relevant government body, like the Land Titles Office, to update the property title and confirm that they no longer have a claim on the property.
The discharge fee mortgage is charged to compensate the lender for the administrative and legal work involved in removing their claim from the property title and ensuring it is clear for future transactions.
While it may seem like an additional cost, it’s a necessary part of finalising the loan closure and ensuring that the property title is clear for sale, transfer, or refinancing.
How Much Does a Mortgage Discharge Fee Cost?
The cost of a mortgage discharge fee can vary significantly depending on the lender, the type of loan, and the state or territory where the property is located. On average, the cost of discharging a home loan in Australia ranges from $150 to $500.
Some lenders may charge as much as $1,000 or more, particularly if there are additional complexities, such as legal or administrative requirements, that extend beyond the standard discharge process.
Here’s a breakdown of some typical costs:
- ANZ: $160
- Commonwealth Bank, NAB, and Westpac: Around $350
- Smaller or non-bank lenders: These lenders can charge fees ranging from $200 to $500, although some may impose additional fees for more complex cases.
In addition to the loan discharge fees, you may also need to account for government registration fees, which typically range from $100 to $200 depending on your location. These are separate from the lender’s fee and cover the cost of officially updating the land title records.
Understanding the complete breakdown of discharge fees for home loans will help you budget for the costs associated with loan closure and avoid unexpected expenses.
When is a Mortgage Discharge Fee Applicable?
A discharge fee mortgage applies when you pay off your home loan in full or close your loan for other reasons. These are the most common situations where the discharge fee will be charged:
- Paying Off Your Mortgage in Full
When you make your final repayment and the loan balance reaches zero, your lender will begin the process of discharging the mortgage. This occurs when the lender releases their claim on the property title, and a fee is typically charged.
- Selling Your Property
If you’re selling your home, any existing mortgage must be discharged before settlement. This ensures the buyer receives a clear title to the property. The discharge fee will apply as part of the final settlement process, and the lender will arrange for the necessary documentation to be filed with the Land Titles Office.
- Refinancing Your Mortgage
If you decide to refinance with a different lender, the original loan must be discharged to create a clean slate for the new loan. When you switch to another lender, the original mortgage is effectively paid off and discharged from your credit report. This triggers the application of a discharge fee for a home loan as part of the refinancing process.
Common Scenarios for Mortgage Discharge Fees
Whether you’re paying off the mortgage in full, selling your property, or refinancing with a new lender, the discharge fee will be applied to cover the legal and administrative costs of finalising your loan.
How to Avoid or Reduce Mortgage Discharge Fees
While mortgage discharge fees are standard in most cases, there are several ways to avoid or reduce these costs.
Distribution of Fees for Different Loan Types
Here are some strategies to help you save money:
- Refinance with a Lender Who Doesn’t Charge Discharge Fees
Some lenders, especially online or non-bank lenders, may offer home loans with no discharge fees. Refinancing with a lender that doesn’t charge mortgage discharge fees can save you a substantial amount, primarily if you’re refinancing a larger loan, where discharge fees could otherwise be significant.
- Negotiate with Your Current Lender
If you’re considering refinancing, it’s worth speaking to your current lender to see if they’re willing to reduce or waive the loan discharge fee. Lenders may be open to negotiating fees, especially if you’ve been a long-time customer or if you’re refinancing within the same bank.
- Refinance at the Right Time
If you’re on a fixed-rate loan, exiting before the fixed term ends can trigger both break fees and a discharge fee. By carefully timing your refinance or home loan repayment, you can avoid paying unnecessary break fees or exit penalties. Consider refinancing close to the end of your loan term to minimise these additional charges.
- Check for Hidden Fees
When shopping for a new home loan or refinancing, always check the fine print to ensure that discharge fees for home loans are clearly stated. Some lenders may offer lower interest rates but charge higher exit fees. Conducting a little research can help you find a better overall deal.
- Consider Loan Features
Some loan products offer features like offset accounts or the ability to make additional repayments. If you plan to pay off your mortgage early, these features could help reduce the total amount owed and may provide more flexibility when it comes to refinancing or discharging your mortgage.
By following these strategies, you can minimise the impact of home loan discharge fees and potentially avoid them altogether.
Other Exit Fees Associated with Mortgages
In addition to the mortgage discharge fee, several other exit fees can arise when you close out your home loan. Understanding these fees will help you better prepare for the costs involved in ending your mortgage.
| Fee Type | Description | Average Range |
|---|---|---|
| Mortgage Discharge Fee | Fee for releasing the lender’s claim on the property title | $150–$500 |
| Break Fees | Fees for exiting a fixed-rate loan early | $300–$1,000 |
| Settlement Fees | Legal and administrative fees when selling the property | Varies by state |
| Government Registration Fees | Fees for updating the land title when discharging the mortgage | $100–$200 |
| Application Fees | Fees charged by new lenders when refinancing | $100–$500 |
Below are some standard fees you may encounter:
- Break Fees for Fixed-Rate Loans
If you have a fixed-rate home loan, exiting the loan before the end of the fixed period may incur a break fee. These fees are designed to compensate the lender for the loss of interest revenue if you pay off the loan early. Depending on how much time is left on the fixed-rate period, break fees can range from a few hundred dollars to several thousand dollars.
- Settlement Fees
If you’re selling your property, settlement fees will apply as part of the property sale process. These fees can include legal costs, conveyancer charges, and administrative costs associated with transferring ownership. Settlement fees are typically separate from the discharge fee but can add to the overall cost of ending your loan and selling your property.
- Government Registration Fees
There are also government fees that must be paid to remove the mortgage from the title officially. These registration fees vary by state or territory and typically range from $100 to $200. They are separate from the discharge fee mortgage charged by your lender and must be factored into the total cost of discharging your loan.
- Early Repayment Fees (for Variable-Rate Loans)
If you make an early repayment on a variable-rate loan that exceeds certain thresholds, your lender may impose early repayment fees. These fees are designed to recoup some of the lender’s lost interest income from the early repayment. However, these fees are typically lower than break fees on fixed loans.
- Application Fees or Establishment Fees (on New Loans)
If you’re refinancing your loan, you may be charged an application fee or a loan establishment fee by the new lender. These fees can sometimes be waived, but they are an essential consideration when comparing lenders.
Be sure to ask your lender for a complete breakdown of all fees that may apply when refinancing or paying off your loan so that you can make an informed decision.
Tip:
Always ask your lender about any additional exit fees, like break fees or settlement fees, to avoid surprises when you close your loan.
Step-by-Step Process for Discharging Your Mortgage
Discharging your mortgage is a multi-step process that involves several key actions from both you and your lender. Here’s a simple guide to help you understand the steps involved in discharging a mortgage:
- Contact Your Lender
Begin by contacting your lender to request a mortgage discharge authority form, which is necessary to initiate the discharge process. This form requires you to provide information, such as your loan details and the settlement date, if applicable.
- Complete the Discharge Form
After receiving the form, please fill it out with the required details. It may also include a request to provide identification, proof of your final repayment, or the details of your new lender if you’re refinancing.
- Pay Any Outstanding Balance
Before the mortgage can be discharged, you must pay off any remaining balance on the loan. This could include the principal amount as well as any interest that has accrued since your last payment. Your lender will provide the final balance, along with any applicable fees.
- Lender Processes the Discharge
Once your lender receives the completed discharge form and the final payment, they will begin processing the discharge fee for the mortgage. This step involves updating their records, filing paperwork with the appropriate authorities, and ensuring everything is in order.
- Submission to the Land Titles Office
Your lender will then submit the discharge documents to the Land Titles Office (or the relevant registry office in your state). This is the legal step where the mortgage lien is officially removed from your property title.
- Confirmation of Discharge
Once the discharge has been processed, your lender will send you confirmation that the mortgage has been fully discharged. You should receive a discharge certificate or similar documentation that proves your loan is closed and the property title is clear.
- Final Steps for Selling or Refinancing
If you’re selling the property, the buyer’s solicitor will typically coordinate with your lender to ensure the mortgage is discharged before settlement. If you’re refinancing, your new lender will often assist with coordinating the discharge with the current lender.
It’s important to note that the entire process may take anywhere from 10 to 21 business days to complete, depending on the lender and any other administrative requirements.
Tip:
Ensure you complete all paperwork and settle any outstanding balance to avoid delays in discharging your mortgage.
Common Mistakes to Avoid When Discharging a Mortgage
Discharging a mortgage can seem straightforward, but homeowners often make several common mistakes that can cause delays or increase costs. Avoiding these mistakes will ensure a smoother, quicker process. Here are the most common pitfalls to watch out for:
- Not Completing the Discharge Form Correctly
The mortgage discharge authority form is a crucial part of the process. If it’s filled out incorrectly or left incomplete, it can cause significant delays. Ensure that all details are accurate, especially your loan account number, property address, and settlement date (if applicable).
- Failing to Pay the Final Balance in Full
Before your lender can discharge the mortgage, the loan must be paid off in full. This includes the final amount due, any accrued interest, and applicable fees. If you miss a payment or fail to cover all amounts, it will delay the discharge process.
- Leaving Too Little Time for Processing
The home loan discharge fee process can take several weeks to complete, particularly if additional documents need to be submitted or if the title office experiences delays. Please allow 10–21 business days for the whole discharge process, especially if you're selling or refinancing the property.
- Ignoring Additional Fees
The discharge fee mortgage isn’t the only cost involved in closing your loan. Ensure you’re aware of all other potential fees, including breakage fees for fixed-rate loans, settlement fees, and government registration fees. Having a clear understanding of all the charges will help you budget properly.
- Not Considering Early Repayment Fees
If you have a fixed-rate mortgage, paying off the loan early can trigger additional breakage fees. These fees can sometimes exceed the amount you expect to pay for the discharge. Be sure to review the terms of your loan carefully and time your repayment or refinancing accordingly.
- Not Consulting Your Lender
While many borrowers choose to handle the discharge process themselves, it’s always a good idea to consult with your lender to confirm the steps and fees involved. Lenders can provide you with a final payout figure that includes all amounts due, including the discharge fee.
By being proactive and avoiding these common mistakes, you can save time and money and ensure the mortgage discharge process goes as smoothly as possible.
Tip:
Double-check your discharge form and ensure you’ve paid off the entire loan to prevent processing delays.
Conclusion
Remember that while discharge fees for home loans are standard, there are ways to minimise or even avoid them. Refinancing with a lender who doesn’t charge these fees, negotiating with your current lender, or simply understanding the timing of your loan can help you reduce costs. Additionally, always factor in other exit fees, such as break fees and settlement fees, when planning your exit strategy.
At Stryve Finance, we specialise in assisting homeowners through every stage of the mortgage process, from refinancing to discharging loans. Our experienced team can guide you in making the most informed decisions and help you navigate any associated fees.
Need Help with Discharging Your Mortgage?
Contact Stryve Finance now for expert advice on mortgage discharge, refinancing, and finding lenders with zero exit fees.
Dylan Bertovic is the Director and Senior Finance Broker at Stryve Finance, specialising in non-traditional lending solutions. He helps clients across Australia with tiny home loans, construction finance, equipment and asset lending, refinancing, and investor loans. With deep expertise in self-employed and renovation mortgages, Dylan is known for crafting tailored strategies that get results
