Discharge Fee (also called settlement fee or exit fee) is the cost charged by your lender to close your loan and remove the mortgage from your property title. This administrative fee covers the lender's costs to prepare discharge documents, liaise with your new lender or buyer's solicitor, and lodge the discharge with the land titles office.
How Discharge Fees Work
When you pay off your loan—whether by selling, refinancing, or paying in full—your lender must discharge (remove) the mortgage registered against your property title.
Discharge process:
- You request payout figure (loan balance + fees)
- New lender or buyer pays your old lender
- Old lender prepares discharge of mortgage documents
- Lender lodges discharge with land titles office
- Mortgage removed from property title (7-14 days)
- You're charged a discharge fee for this service
Typical discharge fees:
- Major banks: $300-$400
- Non-bank lenders: $350-$800
- Some lenders: $0 (rare, competitive advantage)
When You Pay Discharge Fees
1. Refinancing to Another Lender
Most common scenario.
Example:
- Current lender: Commonwealth Bank
- Refinance to: Westpac
- CBA discharge fee: $350
- CBA loan payout: $580,000
- Settlement: Westpac pays CBA $580,350
- You pay $350 (included in new loan or paid from your funds)
2. Selling Your Property
Property sale covers loan discharge.
Example:
- Sale price: $850,000
- Loan payout: $420,000
- Discharge fee: $375
- Agent commission: $18,700
- Conveyancing: $1,650
- Net proceeds: $409,275 (after all costs including discharge)
3. Paying Off Loan Entirely
Inheritance, windfall, or final repayment.
Example:
- Inheritance: $650,000
- Loan balance: $610,000
- Discharge fee: $395
- Total payout: $610,395 (plus any accrued interest to settlement date)
4. Switching Loan Products with Same Lender
Usually no discharge fee when staying with same lender.
Example:
- Current: CBA variable loan
- Switch to: CBA fixed loan
- Discharge fee: $0 (internal product switch)
- Only pay if switching lenders
What's Included in Discharge Fee
Administrative Costs
Lender's internal costs:
- Preparing discharge of mortgage documents
- Calculating final payout amount
- Coordinating with solicitors
- Processing settlement electronically (PEXA)
- Internal admin time
External Costs
Paid to third parties (included in discharge fee):
- Land titles office registration fee ($150-$200)
- PEXA settlement fee ($150-$250)
- Courier fees (if paper documents)
Discharge fee covers all of the above—you don't pay separately.
What's NOT Included
Separate charges:
- Break costs (if exiting fixed loan early)
- Early exit fees (if within lock-in period)
- Outstanding interest (to settlement date)
- Arrears or late fees
Example total payout:
- Loan balance: $530,000
- Accrued interest: $980
- Discharge fee: $350
- Break cost: $0 (variable loan)
- Total payout: $531,330
Discharge Fee by Lender Type
Major Banks
Commonwealth Bank: $350 Westpac: $350 NAB: $300 ANZ: $395
Typical range: $300-$400
Non-Bank Lenders
Mortgage House: $395 Pepper Money: $450 Liberty Financial: $595 Resimac: $450
Typical range: $350-$800
Why higher?
- Smaller scale (can't absorb costs like major banks)
- Higher admin costs relative to loan book size
Online/Low-Fee Lenders
Athena: $0 (no discharge fee) UP Home Loans: $0 86 400: $0 (now part of NAB)
Marketing strategy: No discharge fee attracts refinancers.
Credit Unions
Police Bank: $300 Newcastle Permanent: $325 Heritage Bank: $295
Typical range: $250-$350 (often cheaper than major banks)
Avoiding or Minimizing Discharge Fees
1. Stay with Same Lender (Product Switch)
Example:
- Current loan: Westpac @ 6.5%
- Better rate elsewhere: 5.9% (save 0.6%)
- Speak to Westpac retention team: They match 5.9%
- Product switch: $0 discharge fee
- Save $350 discharge fee + refinancing costs ($1,500-$2,500)
2. Choose Lenders with $0 Discharge Fee
When taking out new loan, consider future discharge costs.
Example:
- Lender A: 5.89% rate, $395 discharge fee
- Lender B: 5.95% rate, $0 discharge fee
Over 3 years (before refinancing):
- Lender A interest: $104,760, discharge fee $395
- Lender B interest: $106,920, discharge fee $0
- Lender A total cost: $105,155
- Lender B total cost: $106,920
Lender A is cheaper despite having discharge fee (lower rate saves more).
But if refinancing within 1 year:
- Lender B may be better (avoid discharge fee)
3. Negotiate Waiver
Some lenders waive discharge fees in special circumstances:
- Financial hardship
- Deceased estate
- Divorce/family breakdown
- Lender error or poor service
Example:
- You faced major delays and poor service
- Complain to lender
- Request discharge fee waiver as compensation
- Lender agrees, saves $350
4. Factor into Refinancing Comparison
Always include discharge fee in total refinancing costs.
Example refinancing cost comparison:
- Old lender discharge fee: $395
- New lender application fee: $600
- Valuation: $400
- Conveyancing/legal: $800
- Total refinancing costs: $2,195
Annual interest saving must exceed $2,195 in year 1 to break even.
Discharge Fee vs Early Exit Fee
Discharge Fee
- Covers administrative costs of removing mortgage
- Charged every time you close a loan
- Applies regardless of loan age
- Typically $300-$800
Example:
- Refinance after 8 years
- Discharge fee: $350 (no other penalty)
Early Exit Fee
- Penalty for closing loan within first 1-4 years
- Designed to discourage frequent refinancing
- In addition to discharge fee
- Typically $500-$3,000
Example:
- Refinance after 18 months (within 3-year exit period)
- Early exit fee: $800
- Discharge fee: $350
- Total fees: $1,150
Both fees apply if refinancing early—check loan terms.
Discharge Timeline
Standard Discharge Process
Timeline:
Day 1-3: Request payout figure
- Contact lender for official payout amount
- Includes: Balance + interest + discharge fee
- Valid for 30 days
Day 7-10: Settlement arranged
- Your solicitor coordinates settlement date
- New lender (or buyer) prepares funds
Settlement day:
- New lender pays old lender electronically (PEXA)
- Old lender receives funds
- Old lender initiates discharge process
Day 1-7 after settlement:
- Lender prepares discharge of mortgage
- Lodges discharge with land titles office
Day 7-14 after settlement:
- Mortgage removed from title
- You receive confirmation letter
- Process complete
Total time: 2-3 weeks from settlement
Delayed Discharges
Sometimes lenders delay (poor admin):
Example:
- Settlement: January 15
- Expected discharge: January 29
- Actual discharge: February 20 (22 days late)
Problem:
- Can't settle next property purchase (if buying)
- May incur holding costs
Solution:
- Chase lender daily after 14 days
- Complain to lender's dispute team
- Lodge complaint with Australian Financial Complaints Authority (AFCA) if excessive delay
Compensation:
- Some lenders refund discharge fee for excessive delays
- Rare to receive other compensation
Discharge Fee in Context of Total Refinancing Costs
Full Cost Breakdown
Example: Refinancing $650,000 loan
Costs to exit old loan:
- Discharge fee: $350
- Break costs (if fixed): $0 (assume variable)
- Early exit fee: $0 (assume loan is 4+ years old)
- Subtotal: $350
Costs for new loan:
- Application fee: $600
- Valuation: $450
- Conveyancing/legal: $850
- Settlement fee: $250
- Subtotal: $2,150
Total refinancing costs: $2,500
Annual interest saving required to break even:
- Break-even: $2,500
- On $650,000 loan: 0.38% lower rate
- Current rate: 6.3%
- New rate must be: 5.92% or lower
If new rate is 5.89% (0.41% saving):
- Annual saving: $2,665
- Refinancing costs: $2,500
- Net benefit year 1: $165
- Year 2+ benefit: $2,665/year (costs already paid)
Is Discharge Fee Significant?
In isolation, no—but combined with other costs:
$350 discharge fee:
- Lender admin fee (unavoidable)
- Small relative to loan size (0.05% of $650K loan)
- Not a major factor in refinancing decision
$2,500 total refinancing costs:
- Significant (0.38% of loan size)
- Must save 0.38%+ to break even in year 1
- Discharge fee is 14% of total refinancing costs (minor component)
State Variations
Land Titles Office Fees (Included in Discharge Fee)
New South Wales: $149.90 Victoria: $118.90 Queensland: $207.10 South Australia: $184.50 Western Australia: $169.50 Tasmania: $190.40
These are built into the lender's discharge fee—you don't pay separately.
PEXA Fees
Electronic settlement fee: $150-$250 (varies by transaction type)
Included in discharge fee.
Common Discharge Fee Questions
Can I Negotiate Discharge Fee?
Usually no—it's a standard fee.
Exceptions:
- Financial hardship
- Lender error (poor service, delays)
- Multiple loans discharging simultaneously (may get discount)
Example:
- Discharging 3 investment property loans simultaneously
- Standard: $350 × 3 = $1,050
- Negotiate: $350 for first, $200 each additional = $750
- Save $300
Is Discharge Fee Tax Deductible?
For investment properties: Yes
- Discharge fee is a borrowing expense
- Deductible over 5 years
Example:
- Investment property loan discharged
- Discharge fee: $395
- Tax deduction: $79/year for 5 years
- Tax benefit @ 39% rate: $30.81/year
- Total tax saving: $154 over 5 years
For owner-occupied homes: No
- Not tax-deductible
Do I Pay Discharge Fee If Loan is Paid Off?
Yes—discharge fee applies regardless of how loan ends:
- Refinancing
- Selling
- Paying off from inheritance/savings
- Final scheduled repayment
Only exception: Some lenders waive fee if you're transferring to another product with same lender.
Can Discharge Fee Be Added to New Loan?
Yes, if refinancing.
Example:
- Old loan payout: $580,000
- Discharge fee: $350
- New loan: $580,350 (includes discharge fee)
- You don't pay $350 from your pocket
If selling:
- Discharge fee is paid from sale proceeds
- Not added to any loan
Strategies to Minimize Lifetime Discharge Costs
1. Refinance Less Frequently
Strategy: Only refinance when saving 0.5%+ in interest.
Example:
- Refinance every 2 years: 15 discharges over 30 years = $5,250 in discharge fees
- Refinance every 4 years: 7 discharges over 30 years = $2,450 in discharge fees
- Save $2,800 in discharge fees alone
2. Negotiate Rate Reductions with Current Lender
Before refinancing, call lender's retention team:
Example:
- Current rate: 6.4%
- Market rate: 5.9%
- Call lender: "I'm refinancing unless you match market rate"
- Lender offers: 6.0% (not quite market, but close)
- Avoid $350 discharge fee + $2,000 refinancing costs
Even if not exact match, $350 savings + avoiding hassle may be worth it.
3. Choose Lenders Strategically
Consider discharge fee as part of total cost:
Long-term hold (10+ years):
- Discharge fee less important (one-time cost)
- Focus on lowest rate
Frequent refinancer:
- Choose lender with $0 discharge fee
- Saves $350 every 2-3 years
Real-World Discharge Fee Scenarios
Example 1: Simple Refinance
Scenario:
- Refinance from CBA to Westpac
- CBA discharge fee: $350
- Settlement: Electronic via PEXA
- Process: Smooth, 10 days
Cost:
- Discharge fee: $350 (deducted from new loan)
- No issues
Example 2: Selling Property
Scenario:
- Sell home for $920,000
- Loan payout: $385,000
- ANZ discharge fee: $395
- Agent fee: $20,240
- Conveyancing: $1,850
Settlement:
- Buyer pays: $920,000
- Agent: -$20,240
- ANZ: -$385,395 (includes discharge fee)
- Conveyancer: -$1,850
- Net to seller: $512,515
Example 3: Delayed Discharge (Problem)
Scenario:
- Refinance from Pepper Money to CBA
- Settlement: March 1
- Pepper discharge fee: $595
- Expected discharge: March 14
- Actual discharge: April 8 (38 days)
Impact:
- Can't refinance CBA loan (waiting for Pepper to discharge)
- Extra interest charged by Pepper for 25 days: $1,450
- Complaint to AFCA
- Pepper refunds discharge fee + $1,000 compensation
Final Thoughts
Discharge fees are a standard cost of closing a loan—typically $300-$800, they're unavoidable when refinancing or selling, but manageable when factored into your overall refinancing decision.
Key takeaways:
- Budget $300-$800 when refinancing or selling
- Included in payout figure (not paid separately)
- Can be added to new loan amount if refinancing
- Tax-deductible for investment properties (over 5 years)
- Small fee relative to total refinancing costs (14% of $2,500)
Refinancing cost checklist:
- Old lender discharge fee: $300-$800
- Old lender break costs: $0-$30,000 (if fixed)
- Old lender early exit fee: $0-$3,000 (if applicable)
- New lender application fee: $0-$800
- Valuation: $300-$600
- Legal/conveyancing: $300-$800
- Total: $900-$36,000 (wide range)
Break-even calculation:
- Total costs: $2,500 (typical)
- Interest rate saving: 0.5% on $600,000
- Annual saving: $3,000
- Break-even: 10 months
- 30-year total saving: $90,000
Discharge fees are a minor component of refinancing costs—focus on the total savings opportunity rather than avoiding a $350 fee. Speak to a NIK Finance broker to compare refinancing costs and benefits across 100+ lenders.
A $350 discharge fee is negligible when refinancing saves you $3,000-$5,000 per year in interest—don't let a small fee prevent you from accessing better rates.