The Costs and Fees of Home Loans: What You'll Actually Pay

When you apply for a home loan, the interest rate gets most of the attention, but the fees can add thousands to what you actually pay.

Some fees appear once at the start. Others show up monthly or when you make changes to your loan. A few are avoidable if you know where to look, and some only apply in specific situations. Knowing which costs are coming, and when, means you can plan your deposit and ongoing budget with confidence.

Upfront Fees When You Apply for a Home Loan

Most lenders charge an application fee, also called an establishment fee, that covers the cost of processing your loan. This typically ranges from $200 to $600, though some lenders waive it entirely during promotional periods or for certain loan products. You'll also see a valuation fee, usually between $150 and $300, which covers the cost of an independent valuer assessing the property you're buying. Some lenders include the valuation fee in the application fee, while others list it separately.

If your deposit is less than 20% of the property value, you'll need to pay Lenders Mortgage Insurance. This isn't a set fee but a premium calculated based on your loan amount and loan to value ratio. For someone borrowing 90% of a property's value, LMI can add anywhere from a few thousand to over $20,000 depending on the property price. The premium is usually added to your loan amount rather than paid upfront, which means you'll also pay interest on it over the life of the loan. You can read more about how borrowing capacity affects your deposit requirements.

Settlement fees cover the administrative work involved in finalising your loan, typically around $150 to $400. Some lenders bundle this with the application fee, while others itemise it separately on your loan documents.

Ongoing Costs You'll Pay Each Month or Year

Most variable rate home loans come with a monthly account-keeping fee, usually between $10 and $15. Over a year, that adds up to $120 to $180. Some lenders charge an annual fee instead, which might be $250 to $400 depending on the loan package. Fixed rate home loans often have lower or no ongoing fees, though you'll pay in other ways if you need to make changes before the fixed period ends.

If your loan includes an offset account, there might be an additional monthly fee for that feature, though many lenders now include offset accounts without extra charges on their owner occupied home loan products. Linked offset accounts reduce the interest you pay by offsetting your savings balance against your loan balance, so even a small fee can be worth it if you maintain a decent buffer in the account.

Consider someone with a variable rate loan of $500,000 who keeps a $30,000 balance in their offset account. At a variable interest rate of around 6%, that offset balance saves them roughly $1,800 a year in interest. Even if the offset account costs $10 a month, they're still $1,680 ahead. The fee structure matters less than how you actually use the features attached to it.

Fees for Making Changes to Your Home Loan

If you want to pay more than the standard repayment amount on a fixed interest rate home loan, most lenders allow up to $10,000 or $20,000 in extra repayments per year before charging a fee. Go beyond that limit and you'll face break costs, which can run into the thousands depending on how much rates have moved since you fixed. Variable rate loans typically allow unlimited extra repayments without penalty, which is one reason many people choose a split loan that combines both fixed and variable portions.

Switching from interest only to principal and interest, or vice versa, usually costs between $150 and $300. If you want to change your repayment frequency from monthly to fortnightly or weekly, some lenders charge a small admin fee while others make the change at no cost.

If your loan is portable and you want to transfer it to a new property when you move, expect a discharge fee on the old property and possibly a new application fee for the new one. Discharge fees are typically $150 to $400. The portable loan feature can still save you money compared to refinancing completely, but it's not always fee-free. For more on changing loan structures, see our page on refinancing.

Hidden Fees That Catch People Out

Redraw fees apply when you withdraw extra repayments you've already made. Some lenders charge $20 to $50 each time you redraw, which can add up if you dip into those funds regularly. Other lenders offer unlimited free redraws, particularly on their variable rate products. If you plan to build equity and then access it later for renovations or an investment property deposit, check the redraw terms before you sign.

If you miss a repayment or your account goes into arrears, late payment fees usually start at $15 to $35 per missed payment. Some lenders also charge monthly fees for accounts in arrears until you catch up. These fees add up quickly and can push you further behind, so if you're struggling with repayments, contact your lender as soon as possible to discuss hardship arrangements. Most lenders would rather work out a plan than pile on fees.

Packaged home loan products sometimes come with an annual package fee of $300 to $400, but in return you get fee waivers on things like extra repayments, redraw, and offset accounts. You might also receive interest rate discounts across your home loan and other linked accounts. Whether the package fee is worth it depends on how many of those features you'll actually use. In our experience, borrowers who actively use offset accounts and make regular extra repayments usually come out ahead with a packaged loan, while those who set and forget their repayments often pay for features they never touch.

When Lenders Waive Fees and How to Ask

During refinancing campaigns or promotional periods, many lenders waive application fees to attract new customers. If you're refinancing your current home loan, ask your broker or the lender directly whether they'll waive the application and valuation fees. Many will, particularly if you have a strong borrowing capacity or a low loan to value ratio.

Some lenders also waive ongoing fees if you meet certain conditions, such as depositing your salary into a linked transaction account or maintaining a minimum loan balance. These conditions are usually buried in the fine print, so it's worth asking upfront what you need to do to avoid monthly account-keeping fees.

If you're comparing rates across multiple lenders, don't just look at the interest rate. Add up the upfront and ongoing fees over the first few years to see what you'll actually pay. A loan with a slightly higher variable interest rate but no ongoing fees might cost less overall than one with a lower rate and $15 a month in account fees, depending on your loan amount and how long you plan to hold the loan.

Legal and Government Costs Outside the Loan Itself

You'll also pay for conveyancing or legal fees to transfer the property title, which typically run between $800 and $2,000 depending on your state and the complexity of the transaction. These aren't charged by the lender, but they're part of the total cost of securing your home loan and settling on a property.

Each state charges different stamp duty rates, and while this isn't a loan fee, it's a major upfront cost you need to factor into your budget. First home buyers may qualify for stamp duty concessions or exemptions depending on the property price and location. You can explore eligibility and other considerations on our first home buyers page.

Title search fees and other government charges usually add another $100 to $300 to your settlement costs. Your conveyancer will itemise these on your final statement, but it's worth asking for an estimate early so you're not scrambling to find extra funds at the last minute.

Calculating Home Loan Repayments With Fees Included

When you use an online calculator to estimate your repayments, most tools only factor in the loan amount, interest rate, and loan term. They don't include ongoing fees, which means your actual repayment will be slightly higher than the calculator suggests. If your loan has a $10 monthly fee, add roughly $2.30 to your weekly repayment or $120 to your annual cost.

For a $400,000 loan at a 6% variable rate over 30 years, your principal and interest repayment would be around $2,400 a month before fees. Add a $15 monthly account fee and you're at $2,415. Over 30 years, that $15 fee costs you an extra $5,400, not counting the compounding effect if you're not making extra repayments to offset it.

If you're trying to achieve home ownership on a tight budget, every dollar counts. Focus on loans with low or no ongoing fees, and make sure any features you're paying for actually help you build equity or improve your financial stability. A loan with an offset account you never use just costs you money. A loan with a redraw facility you tap into regularly when you need lower repayments can be worth the fee.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structures across different lenders, show you where you can save, and help you compare rates and features in a way that makes sense for your situation. You can book an appointment online, and we'll make sure you know exactly what you're paying before you sign anything.

Frequently Asked Questions