Time to read : 3 Minutes
Ah, home ownership – the great Australian dream. You scrimp, save, and swear off smashed avo for three years, and finally, you're ready to buy a place of your own. Amazing stuff!
Now, just sign here… and here… and initial this. Oh, and here’s a lovely little collection of fees you’ll be paying – some just once, others for the rest of your natural life (or at least the life of your home loan).
Home ownership wouldn’t be a proper milestone without a few mystery charges thrown in for good measure.
Welcome to the ironic reality of home loan fees, where giving the bank hundreds of thousands of dollars just isn’t quite enough. As a former mortgage broker, I’m going to walk you through the fees, starting with this one…
Your loan application fee
Sometimes called a ‘loan establishment fee,’ this is what lenders charge you for processing your loan application.
While there are more lenders these days waiving this fee – and it is possible to get a basic loan with no application fee – it can still range anywhere from $200 - $800 or more. It really comes down to your lender and their offering.
What do you get for that money? A credit check, some paperwork, and the warm feeling of being charged before you've even borrowed a cent.
Now that your mortgage has been approved and you're officially committed to 30 years of repayments, there might be more ongoing fees. Let’s dive in.
Monthly account-keeping fees
Looking after your loan is (apparently) hard work, and someone needs to be compensated. If your lender charges account-keeping fees, they’re around $10 - $15 a month. Which could add up to about $4,320 over 30 years. Can AI do it? Maybe, but don’t expect your lender to reduce this fee.
💡It is possible to get a home loan without monthly account-keeping fees, so shop around.
Annual package fees
Most lenders won’t recommend a package loan unless it’s in your best interest in terms of savings. But if you do bundle your home loan with other financial products, for example, a credit card, offset account or redraw facility, you might get hit with an annual fee of $300 - $400 for an interest rate discount. Along with that, you have an additional 16 pages of fine print to digest.
Redraw fees
While these are not specifically loan fees, there is usually a small fee if you redraw from a teller in a branch. To skip the redraw fee, you could do an online funds transfer to another account you hold and then withdraw the funds from an ATM with no fees.
Offset account fee
Setting up an offset account to reduce your interest is usually a smart idea but remember to factor in the $5 - $10 monthly fees for saving all that interest. It is often worth it, but always do your maths. Here’s a piece I wrote about offset accounts if you want to dig a bit deeper.
Early repayment and exit fees
Tried to get ahead and pay off your loan early? Good for you – but keep in mind that some lenders charge you a fee for this – especially if you’re exiting a fixed-rate loan.
Be aware: these charges are called ‘break fees’ or ‘breakout costs’ and can run into tens of thousands if you leave your fixed rate period early.
This is what happens when your financial responsibility gets in the way of your lender’s profit forecasts. Again, it may well be worth doing but look at your numbers with care.
Discharge fees
Refinancing with another lender for a better deal? You could be up for discharge fees – which are usually anywhere from $150 - $400 – just to formally kiss goodbye your old lender. After all, nothing says “thanks for the business” like that final invoice.
Fees commonly charged before settlement include:
Valuation fees – to confirm your property is worth what you said it is. Expect to pay between $200 - $600.
Legal fees – because someone has to interpret your lender’s 48-page loan agreement.
Settlement fees – to celebrate the moment when all the fees are finally over… until the next batch begins.
So… why all the fees?
In theory, they cover the lender’s costs. In reality, they exist because they can.
You’ll rarely find all fees clearly listed in one spot, and comparing loans becomes a little like comparing mobile phone plans – intentionally confusing, probably expensive, and full of vague phrases like “may apply.” That’s where an expert mortgage broker can really help you out.
Bottom line
While many lenders offer low-interest ‘no fee’ loans, be wary – obvious savings might be offset (ironically) by fewer features. Read the fine print… then read it again, because higher fees could be charged elsewhere on your home loan.
Always read the Key Facts Sheet and ask any questions you can think of – even the obvious ones – because in the magical world of mortgages, the only thing more persistent than your home loan is… you got it, the fees.
Which brings us back to: read the fine print… then read it again.
Go deeper:
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
