Home Loan Fees

Looking to take out a home loan? Savvy is here to inform you about home loan fees and help you make the right decisions!

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, updated on September 21st, 2023       

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When taking out a home loan with your chosen lender, there are many associated fees. It is important you understand these home loan fees to ensure you avoid the ones which are unnecessary and reduce the overall cost of your home loan.

Types of home loan fees charged by lenders

When applying for your home loan, you will encounter a range of costs you perhaps did not know about. Some of these costs are upfront, some are ongoing and some you will encounter as you end your home loan.

  • Establishment fees – Establishment fees are a once-off charge at the beginning of your home loan application. This fee will typically cost between $150-$700 and will differ based on the sum of your home loan.
  • Valuation fees – Valuation fees pay for your property’s assessment by a third-party valuer. Depending on the location of your property, this fee will usually cost approximately $100-$300. The purpose of this valuation is to determine if the loan amount and sum of your down payment match with the property’s value.
  • Conveyancing fees – These fees are for the transfer of a property’s title from the seller to you. It is a vital part of settling a loan and prices are normally assessed by the conveyancer.
  • Legal costs – The legal costs for home loans will vary on a case-by-case basis but will cover the services relating to the preparation and maintenance of legal documents regarding your home loan. Ideally documents which must be signed by all parties should be managed by a legal team.
  • Lenders Mortgage Insurance (LMI) – If you borrow more than 80% of the property’s value for your home loan, the lender will charge you LMI. LMI protects the lender from risk in a scenario where the borrower is unable to pay back the home loan.

In addition to the above up-front costs of your home loan, you may also incur some ongoing costs which cover certain features of your loan.

  • Monthly service fee – Covers the administration and servicing associated with your home loan. This is charged on a monthly basis and can cost from $5-$15.
  • Annual fees – If your home loan is tied with special discounts under a package home loan, you may be charged an annual fee by your lender. This can range from $300-$400.
  • Repayment charges – Additional early repayments on your loan may incur extra charges depending on your agreement with your lender.
  • Redraw fees – Paying additional repayments and using a redraw facility to withdraw them will potentially result in a fee. Some lenders offer this for free while others may charge as much as $50.
  • Late payment costs – Making your repayments beyond the cut-off date may incur a charge specific to each lender.
  • Switching fee – A switching fee will be assessed when switching between a fixed interest rate and a variable interest rate and vice versa.
  • Discharge costs – If you opt to end your agreement with your lender due to loan settlement, refinancing your home loan, or switching to a different lender, you will be charged a discharge fee.

Upon the settlement of your home loan, you may encounter the following costs:

  • Discharge fee – A discharge fee will be assessed once you have fully paid off your mortgage. This is to cover the final completion of your home loan and ensure the transfer of your certificate of title into your hands.
  • Home loan early exit fee – If you opt to pay off your loan’s principal balance early, you will likely be charged an early exit fee. This fee will cover any loss incurred by the lender.

Types of government-assessed home loan fees

In addition to the home loan fees applied by your lender, you will also be liable to pay stamp duty and mortgage registration fees by your state government. 

A stamp duty fee is assessed by your state government and is a tax that is payable when you purchase a property in Australia. The stamp duty cost is based on the selling price of a property and is calculated by the relevant state government. If you’re a first homebuyer, you may be eligible for a concession.

Furthermore, you will also be assessed a once-off mortgage registration fee that typically costs between $145-$187. This fee is charged by your state’s Land Titles Office to register the mortgage on the property’s certificate of title.

Top tips to reduce your home loan fees

Frequently asked questions about home loan fees

Which lenders offer special home loans with waived fees?

An array of big banks and renowned mortgage lenders regularly run promotions to offer special deals to potential home loan customers. These deals often change on a monthly basis and include the waiving of fees or cashback promotions.

What’s the average cost of upfront home loan fees?

The average cost of your upfront home loan fees will be roughly $650-$700. This cost could increase or decrease based on the features you seek and your own financial situation.

Should I move on to the next home loan product when I see a higher than usually establishment fee?

No. Sometimes a high establishment fee will be paired with a low interest rate which results in significantly lower costs over the course of your home loan. It is important to do your research thoroughly beyond the first impressions of a home loan product.

Is there any added benefit to being a first-home buyer?

As a first-home buyer, lenders will often offer the option of a ‘honeymoon rate’. This is a low interest rate which applies to the beginning of a home loan for a specific period. This lower interest rate usually lasts between 6-12 months before the loan’s interest rate will revert to its standard rate.

Is it possible to borrow money to pay off my stamp duty costs?

Yes. It is possible to take out a personal loan in order to cover the costs of stamp duty.

Should I choose a home loan with a redraw facility?

Yes! Redraw facilities can prove beneficial in allowing you to make extra repayments and reduce your long-term interest paid. However, make sure you don’t make extra payments you can’t afford as withdrawal fees can prove costly both in the short term and long term. 

I am concerned I am getting charged too much on my home loan fees, what should I do?

Call your lender straight away! Speak to somebody from the retention department and they will usually be willing to negotiate your home loan fees and even your interest rates to not lose your business to a competitor.

Are there any professions which are benefited by specific home loan fees being be reduced or waived?

Yes! Some lenders have LMI waiver policies for specific industry professionals. These specific industries are viewed as having higher incomes and stable forms of employment; therefore, it is possible to have the LMI fee waived. They can include the following:

  • Medical – e.g. specialists, surgeons, GP’s, dentists, vets.
  • Legal – e.g. judges and solicitors.
  • Accounting and finance – e.g. Accountants and financial controllers.

 

If you don’t work in any of the listed fields, you may still be eligible should your spouse or partner instead work in a relevant profession. Bear in mind, this doesn’t mean you will automatically have the LMI waived. You will still be required to meet other eligibility criteria as listed in your lender’s policies.

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