What are home loan break fees?
Last updated: 06 October 2025 | Estimated read time: 3 Minutes
When you first take out a home loan, you’re probably focused on the excitement of buying your home, not on what might happen if you pay off your loan early or refinance down the track. But life changes, and it’s worth being aware of any fees that could apply if you end your loan early.
Whether you’re selling, refinancing to a better rate, consolidating debt, or simply paying off your loan ahead of schedule, understanding break fees can help you plan with confidence.
What are home loan break fees?
Break fees are charges that may apply if you end a fixed rate home loan before the end of the agreed term. These fees can be significant, especially if interest rates have dropped since you locked in your rate.
If you’re thinking about refinancing or repaying your loan early, it’s a good idea to ask your lender for a break fee quote before making a decision.
When do break fees apply?
Break fees usually apply when:
- You refinance your fixed rate loan before the term ends
- You repay your loan in full ahead of schedule
- You sell your property and pay out the loan early
The fee is often based on the difference between your fixed interest rate and the current market rate. This mean means that the lower rates have fallen, the higher your break fee could be.
What are the different types of break fees?
Different lenders may use different terms, but here are some common types of fees to be aware of:
Early exit fees
Also known as early termination or deferred administration fees (DAF), these may apply if you pay out your loan within a set period (e.g. two or five years).
At Pepper Money, we don’t charge early exit fees — but other fees may still apply, so it’s worth speaking with one of our Lending Specialists.
Discharge fees
This is the fee you pay to formally end your loan agreement. At Pepper Money, we include this amount upfront in your loan contract, so there are no surprises.
You may also need to cover legal or admin costs related to discharging your mortgage.
Refinancing fees
If you’re switching to a new lender, there may be fees for:
- Setting up the new loan
- Discharging your current loan
- Breaking a fixed rate term
These costs can add up, so it’s important to look at the full picture when comparing home loan options.
We're here to help
Understanding break fees can feel complex, but you don’t have to figure it out alone.
You can learn more at MoneySmart or speak with one of our Lending Specialists on 137 377. We’ll walk you through any fees that may apply to your Pepper Money home loan and help you make an informed decision.
Contributor | Dianne Wassouf, Head of Customer Solutions
Dianne joined Pepper in 2012 and is now responsible for all Customer Service and Resolutions post settlement teams across Australia and Manila. Her expertise focuses on customer solutions and assistance and has equipped her with a deep understanding of client relations and service excellence.
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