HOME LOANS
First home buyer loan guide and rate comparison
By Megan Birot
Here’s a list of mortgage fees and charges that could apply to your home loan. We’ve made it easy by grouping each fee according to when it’s usually paid. Remember, fees can vary depending on the lender and loan product.
Summary of home loan fees and charges
Upfront fees
- Application fee: A one-off cost between $150 and $750 to set up your home loan, also known as a loan processing fee or establishment fee.
- Document processing fee: The cost of preparing and processing documents for a new loan application. Typically ranging from $100 to $600.
- Search processing fees: Paid to your lender for the title search or any other searches related to your application (usually $50 per search).
- Valuation fee: Charged to cover the cost of conducting a valuation on your property – either online or by an external valuer. Expect a charge of $100-$300, or it may be dependent on the property location and value.
- Rate lock fee: A $450-$750 fee for ‘locking’ your fixed rate while the lender processes your home loan application.
- Security guarantee fee: Payable if a guarantor is added to the home loan for additional security – typically $200-$300.
Fees paid upon settlement
- Settlement fee: A cost ranging from $150 to $300 for arranging settlement, organising the balance transfer to the seller and title transfer to you. This fee is payable regardless of whether the lender attends settlement or not.
Building fees (progressive drawdown)
- Progressive drawdown fee: Usually found on construction home loans where the lender charges a fee to release each ‘progress payment’ to the borrower as the build progresses. A fee of $50-$100 typically applies each time funds are drawn down.
Ongoing fees
- Monthly service fees: A monthly fee of $8 to $15 that covers the costs of administering your home loan. Also known as a loan service fee.
- Annual package fee: A yearly fee ($300 - $600) charged on a package home loan to bundle your mortgage with other financial products like a credit card or savings account.
- Late/missed payment fees: Charged on any overdue mortgage repayments, otherwise known as an arrears fee. Typically $15 to $25 per month.
Feature fees
- Redraw fees: Charged when redrawing extra payments made on your home loan – usually on fixed rate home loans. Usually $0 to $20 per redraw.
- Offset account fee: Charged to link your offset account to your home loan, including servicing. Costs $8 to $10 per month (or as a yearly figure), or as a one-time fee of $75 - $100.
- Portability fee: $150 - $300 fee for transferring your home loan to another property (i.e. when you buy a new home).
- Extra repayments fee: $0 to $20 charged if you pay your home loan off early or make early or extra repayments (usually on fixed rate home loans).
Exit fees
- Fixed rate break cost: A fee you pay if you repay a fixed rate home loan early or switch to a variable rate before your fixed term ends. Cost is dependent on the lender.
- Exit fees: Payable when exiting a home loan early (i.e. refinancing). Exit fees have been banned on new home loans from 1 July 2011. Fees vary based on the lender.
- Switching fee: A $100-$300 fee for refinancing to a new home loan or new lender.
- Discharge fee: Payable when you pay off your home loan in full and the lender discharges your mortgage. Typically $350 to $500 per mortgage.
How mortgage fees impact your home loan
When you apply for a home loan, the interest rate isn’t the only cost to consider. Home loan fees can also impact what you pay.
To make sure you know how much you’ll be paying in fees and when, check your home loan’s Key Fact Sheet or schedule of fees for the full breakdown of fees and charges.
Lenders charge mortgage fees based on the type of home loan you choose and the service you require.
Broadly speaking, home loan fees may be charged:
- When you apply
- When the loan is finalised at settlement
- Throughout the loan term
- If you break a fixed rate home loan
- If you refinance to another lender
- If you require a guarantor
- When you repay the loan in full
Why do lenders charge home loan fees?
Lenders charge fees to cover the cost of processing and administering your home loan.
When you apply for a mortgage, a home loan specialist has to review your financial documents, conduct a credit check, organise a property valuation, process the legal documentation (e.g. sale agreement, deed of trust) and liaise with conveyancers until settlement day.
After that, your lender still has to manage your home loan account until it’s discharged (which can take up to 30 years).
In short, these fees help lenders recover their operational costs, manage risk and provide flexibility or added features to borrowers.
Home loan fee cost comparison
Home loan fees can have a significant impact on the overall cost of your mortgage. Here’s an example for a $600,000 home loan with a 6.00% interest rate over 30 years, with lower and higher fees.
Loan amount | |
Home loan with lower fees | $600,000 |
Home loan with higher fees | $600,000 |
Interest rate | |
Home loan with lower fees | 6.00% p.a. |
Home loan with higher fees | 6.00% p.a. |
Loan term | |
Home loan with lower fees | 30 years |
Home loan with higher fees | 30 years |
Upfront fee | |
Home loan with lower fees | $350 |
Home loan with higher fees | $650 |
Ongoing fees (monthly) | |
Home loan with lower fees | $0 |
Home loan with higher fees | $15 |
Discharge fee | |
Home loan with lower fees | $300 |
Home loan with higher fees | $500 |
Monthly repayments | |
Home loan with lower fees | $3,597 |
Home loan with higher fees | $3,616 |
Total fees payable | |
Home loan with lower fees | $650 |
Home loan with higher fees | $6,550 |
Total to repay on loan (principal, interest & fees) | |
Home loan with lower fees | $1,295,031 |
Home loan with higher fees | $1,302,332 |
Cost difference | |
Home loan with lower fees | |
Home loan with higher fees | +$7,301 |
Fees as a percentage of the home loan amount | |
Home loan with lower fees | 0.10% |
Home loan with higher fees | 1.09% |
| Home loan with lower fees | Home loan with higher fees | |
|---|---|---|
Loan amount | $600,000 | $600,000 |
Interest rate | 6.00% p.a. | 6.00% p.a. |
Loan term | 30 years | 30 years |
Upfront fee | $350 | $650 |
Ongoing fees (monthly) | $0 | $15 |
Discharge fee | $300 | $500 |
Monthly repayments | $3,597 | $3,616 |
Total fees payable | $650 | $6,550 |
Total to repay on loan (principal, interest & fees) | $1,295,031 | $1,302,332 |
Cost difference | +$7,301 | |
Fees as a percentage of the home loan amount | 0.10% | 1.09% |
When applying for a home loan or refinancing, look at the comparison rate, not just the interest rate. The comparison rate estimates the overall cost of a home loan per year, including fees. Keep in mind, it’s based on a $150,000 loan over 25 years and might not reflect your personal scenario, but it can help highlight loans with higher fees.
Other home loan fees to consider
While we’ve covered the home loan fees charged by lenders, there are additional costs to consider:
Lender’s mortgage insurance (LMI)
If you’re buying a home and your deposit is less than 20% or if you’re refinancing and your loan-to-value ratio (LVR) exceeds 80%, you may have to pay lender’s mortgage insurance (LMI).
This is an insurance premium that covers the lender against the risk of you not being able to repay the loan. It’s calculated on a tiered scale, based on your LVR. You can add LMI to your home loan to avoid paying for it upfront, although this will increase your total interest costs.
Legal and conveyancing fees
When you buy a home, you’ll usually need to engage a conveyancer or solicitor to handle all the legal paperwork and processes, like transferring the property title to your name, etc.
Conveyancing fees can range between $1,200 and $2,400. These costs can vary depending on the complexity of the transaction and the state or territory you’re buying in.
Stamp duty
Stamp duty is a state government tax on property purchases and title transfers. It’s calculated as a percentage of the property’s value, ranging from 3-5%.
Stamp duty rates vary in each state or territory. Use our stamp duty calculator to estimate your costs. Stamp duty concessions or exemptions apply to eligible first home buyers in most states.
Mortgage registration fees
Your state or territory government will charge you mortgage registration fees to register your mortgage on a property title.
This registers your property as the security on the home loan, allowing future buyers or lenders to check caveats on your home.
How to get mortgage fees waived
While some fees are simply unavoidable, it’s worth researching lenders that offer fee waiver benefits. Or, engage a mortgage broker with knowledge on which lenders are likely to waive home loan fees for new customers.
Mansour Soltani, Money.com.au's Home Loans Expert
“A mortgage broker can generally negotiate with a lender to waive the home loan application fee and other fees. You can also ask the lender yourself to waive some fees or match the offer of a competitor to win your business. It’s all fair game. Lenders are generally more likely to waive home loan fees if you have a decent-sized home loan or good credit rating.”
Mansour Soltani, Money.com.au's Home Loans Expert
Additional costs associated with owning property
Home loan fees are just one part of the picture – owning property comes with a few more costs to keep in mind.
1
Pest and building inspections
Before finalising a property purchase, pest and building inspections are strongly recommended to check for structural issues or pest infestations. These typically cost between $400 and $600, depending on the property size and location.
2
Home insurance
Otherwise known as building insurance, and often required by lenders that protects your house from damage due to events like fire, storms or theft. Expect to pay $800 to $2,000 per year, though costs vary based on property value, location and coverage level.
3
Council permits
If you’re planning renovations or structural changes, you'll likely need council approval, which involves application fees and sometimes inspections. Council permit fees can range from $200 to over $2,000, depending on the scope and complexity of the work.
4
Body corporate levies
If you own a unit, townhouse or duplex in a strata complex, you’ll need to pay body corporate levies for shared property maintenance. These levies usually range from $500 to $5,000 per quarter, based on common amenities and the building’s upkeep needs.
5
Utilities
Ongoing utility costs include council rates, water bills, and electricity or gas usage. Combined, these can cost homeowners $3,000 to $5,000+ per year, depending on property size, usage and local council rates.
6
Home maintenance
Regular maintenance like gutter cleaning, lawn care or minor repairs helps prevent long-term damage. Basic maintenance tasks can cost $500 to $2,000+ annually, especially if you hire professionals.
