Australia’s home loan interest rates are currently quite low, but this doesn’t impact on home loan fees and charges. Those fees could add up to a few hundred dollars, so it’s worth knowing how much your lender might charge you.
Here’s a summary of the most common home loan fees to ask about.
Home loan exit fees
If you took out your home loan before 1 July 2011, you may be liable for exit fees on your loan. This type of fee cannot be charged on any home loan taken out after 30 June 2011. Make sure you check with your existing lender as to whether an exit fee would apply before you refinance your home loan.
Home loan early exit fees
Also called “early termination”, “deferred establishment”, “deferred application” or “early discharge” fees. These may be charged if you pay out your home loan in full within a specified period (e.g. within the first 5 years). You won’t know how much the early exit fee will cost until the credit provider tells you.
The law limits these fees to the recovery of a credit provider’s loss caused by the early termination – but that can still be a lot of money. Generally, the more interest rates have come down since you took on the fixed rate loan, the higher the break fee will be.
In a home loan environment where interest rates are falling, you may find that breaking a fixed rate loan contract that was set at a higher interest rate than current fixed-term contracts could end up being quite expensive.
What do the big 4 charge for home loan exit fees?
- ANZ: charges a $160 settlement fee
- CBA: $350 discharge/settlement fee
- NAB: $350 discharge/settlement fee
- Westpac: $350 in discharge costs
Home loan discharge fees
Also called “termination fees” or “settlement fees”, home loan discharge fees may be charged when you pay out your mortgage in full. Based on Canstar’s research of more than 1,100 home loans, discharge fees are as follows:
| Standard Variable Discharge Fees | |||
|---|---|---|---|
| Minimum | Maximum | Average | |
| Residential | $0.00 | $1,068.00 | $255.04 |
| Investment | $0.00 | $1,068.00 | $259.63 |
| Source: www.canstar.com.au
Based on loan amount of $350,000, 80% LVR, Principal & Interest repayments. |
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| Fees current as at 23 March 2017. | |||
| 3-Year Fixed Discharge Fees | |||
|---|---|---|---|
| Minimum | Maximum | Average | |
| Residential | $0.00 | $1,068.00 | $255.11 |
| Investment | $0.00 | $1,068.00 | $259.57 |
| Source: www.canstar.com.au
Based on loan amount of $350,000, 80% LVR, Principal & Interest repayments. |
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| Fees current as at 23 March -2017. | |||
Lender’s mortgage insurance
Lenders Mortgage Insurance (LMI) is a type of insurance that credit providers take out to protect themselves from borrowers not being able to repay the loan. If your loan amount is more than 80% of the price of your home (for first home buyers) or the current value of your home (for those who are refinancing or buying a new home), you may have to pay LMI.
If you paid LMI on your current loan, find out if you have sufficient equity in your home to avoid paying LMI again when switching loans. If you switch loans within the first year or two, you may be able to get a refund of some of the LMI premium you paid on your current loan.
What does lender’s mortgage insurance cost? As a general idea, and using the LMI calculator available through one of Australia’s largest lender’s mortgage insurance providers, Genworth, here are some indicative calculations for a first home borrower in NSW, based on different deposit amount (LVRs) available:
| Cost Of Lender’s Mortgage Insurance (LMI) | |||
|---|---|---|---|
| Property Cost | 5% Deposit | 10% Deposit | 15% Deposit |
| $300,000 | $7,610 | $4,077 | $2,219 |
| $400,000 | $12,768 | $6,912 | $3,842 |
| $500,000 | $15,960 | $8,640 | $4,803 |
| $600,000 | $25,707 | $13,176 | $6,630 |
| $700,000 | $29,992 | $15,372 | $7,735 |
| Source: Quotes taken from Genworth LMI calculator, correct as at 23 March 2017. Premium for first home buyers to a loan term of up to 30 years. | |||
Home loan establishment fee / Home loan application fee
A home loan application fee is a once-off fee paid to the lender for setting up a home loan. The application fee can also be called an establishment fee, up-front fees, start-up fees, or set-up fees. If you are not charged an application fee or establishment fee, you may be charged higher ongoing fees.
Based on Canstar’s research of more than 2,400 home loans, home loan application fees are as follows:
| 3-Year Fixed Upfront Fees | |||
|---|---|---|---|
| Minimum | Maximum | Average | |
| Residential | $0.00 | $1,463.00 | $502.67 |
| Investment | $0.00 | $1,463.00 | $486.45 |
| Source: www.canstar.com.au
Based on loan amount of $350,000, 80% LVR, Principal & Interest repayments. |
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| Fees current as at 23 March 2017. | |||
Home loan ongoing fees
Home loan ongoing fees are charged every month or year for administering your loan. Some ongoing fees may only be payable in certain circumstances. For example, you might be charged a fee to use a redraw facility to withdraw any extra repayments you have already made towards your loan.
On our database, the average annualised ongoing home loan fees are currently $93/year for owner occupiers with a variable home loan rate and $104/year for investors on a variable rate loan.
Do be aware, though, that ongoing fees can be as high as $750/year (based on a $350,000 home loan). So definitely compare your options!
| Standard Variable Annualised Ongoing Fees | |||
|---|---|---|---|
| Minimum | Maximum | Average | |
| Residential | $0.00 | $750.00 | $93.92 |
| Investment | $0.00 | $750.00 | $104.70 |
| Source: www.canstar.com.au
Based on loan amount of $350,000, 80% LVR, Principal & Interest repayments. |
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| Fees current as at 23 March 2017. | |||
3-Year Fixed Annualised Ongoing Fees |
|||
| Minimum | Maximum | Average | |
| Residential | $0.00 | $750.00 | $101.07 |
| Investment | $0.00 | $750.00 | $110.15 |
| Source: www.canstar.com.au
Based on loan amount of $350,000, 80% LVR, Principal & Interest repayments. |
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| Fees current as at 23 March 2017. | |||
Our easy-to-use Home Loan Comparison Calculator incorporates ongoing and upfront home loan fees in making comparisons between two loans. Try it out and see how much you could save by choosing one loan over another.
Other home loan fees you need to know about
Some home loan fees only apply in certain circumstances, such as:
- Property valuation fees
- Late payment fee (also called default fee) (if you make a required repayment later than the due date)
- Break fees (also called break costs) (if you switch loans during a fixed rate term)
- Redraw fees (if you use a redraw facility)
- Account-keeping fee for offset account (if you have an offset account attached to your loan)
Summary of major home loan costs
The table below is a summary of the major costs outlined above, using low-end or average figures:
| Charge | Cost |
| Home loan early exit fee | $160 |
| Home loan settlement fee | $255.04 |
| Lender’s mortgage insurance (LMI), 80% LVR | $4941 |
| Home loan establishment fee | $502.67 |
| Home loan ongoing fees | $93.92 per year |
| Total | $5,953 |
LMI was calculated using the Genworth LMI calculator for a 20% deposit on a house costing $686,000, the median NSW house price as of June 2017.
As you can see, even a conservative estimate of typical home loan fees still works out to nearly $6,000 in your first year – not something to sniff at!
The last word on home loan fees
Don’t be confused by the number and complexity of the fees and charges outlined above. Fees and charges can change and different credit providers charge different fees, or it charge the same fee under a different name.
Most credit providers publish fees and charges in their product booklets and on their websites. However, it is always wise to check the latest information – both from your existing loan provider and your prospective new loan provider. Only then will you know the true cost of switching from one loan to another.
If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest-highest). Products shown are principal and interest home loans available for a loan amount of $350K in NSW with an LVR of 80% of the property value and that offer an offset account. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products.
Learn more about the average rates, fees, and features in our Home Loans Star Ratings report:
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