Home loan and mortgage fees you should know about
If you’re looking for a home loan it can be tempting to focus on what interest rate you’ll pay. But you should also take a close look at what home loan fees you’ll be charged.
28 May 2025
If you’re looking for a home loan it can be tempting to focus on what interest rate you’ll pay. But you should also take a close look at what home loan fees you’ll be charged.
KEY POINTS:
- If you take out a mortgage, home loan fees can add to the overall cost of buying your new home.
- You can use a loan’s comparison rate to give you a better idea of the home loan fees that may be charged.
- Not all home loan lenders will charge additional mortgage fees.
Lenders may charge a variety of home loan fees, which can add to the total cost of buying your new home. So let’s take a closer look at what fees and charges may be attached to a home loan.
Home loan fees to be aware of
Home loan fees can be broken down into three main categories: upfront, ongoing and discharge.
1. Upfront fees
When you first take out a home loan, the lender may charge a variety of upfront fees. These are one-off fees, but they can still take a bite out of your home-buying budget. Upfront fees can include:
Application/loan establishment fees
When you set up a new home loan you’ll usually be charged an application fee, which is often described as an ‘establishment’ or a ‘set-up’ fee. How much you pay can vary between lenders.
Around 39% of lenders on Canstar’s database charge an application fee, so it may be possible to avoid this cost altogether depending on the lender you choose.
Among lenders that do charge application fees, the average cost was $487 at the time of writing. There can, however, be big variations with application fees ranging from $150 to $990 among lenders who charge the fee.
Valuation fees
Your lender may ask you to pay a valuation fee. This covers the cost for a lender to have the home you’re planning to buy professionally valued before your mortgage can be fully approved. You may have difficulty getting the loan approved if the valuation comes in lower than expected. While the average valuation fee across the Canstar database is $256, you could be asked to pay anything from $200 to $349.
Legal fees
Lenders may pass on the legal fees they’ve notched up for the work involved in preparing formal loan documents. Among the lenders who pass this cost on across Canstar’s database, legal fees range from $200 to $440, with the average fee being $321.
Bear in mind, a lender’s legal fees are separate from your own legal fees. You’ll still need to pay your own solicitor or conveyancer for the work they do reviewing the contract of sale, and transferring the title of the property out of the seller’s name and into your own.
Settlement fee
A settlement fee can be charged when you first take out a home loan, when you want to top up your current loan with additional funds, or if you decide to refinance to a new loan. On average, expect to pay around $234 (but they can vary from $100 to $499).
2. Ongoing fees
A variety of ongoing home loan fees may apply to your loan. Again, what you pay depends on your lender and your choice of home loan. That said, there are two main fees to be aware of.
Monthly home loan fees
Not all home loans come with monthly fees (also known as ‘loan service fees’), but across Canstar’s database, around 14% of loans charge a monthly fee, with the average cost being $9 per month. The range of cost for these fees can be anywhere between $6 and $15 a month. This may seem like a small amount, but over the course of a 25- or 30-year home loan, it can really stack up.
Annual package fees
Package home loans typically bundle a number of financial products together such as a home loan, transaction account and maybe a credit card. A potential plus of package loans is an ongoing discount on the home loan interest rate, and it’s often accompanied by additional benefits such as savings on a credit card’s annual fees.
In return for these savings, homeowners pay an annual package fee. Among package loans on the Canstar database, the average annual package fee is $374, though it can range from $199 to $399 each year.
3. Fees when your loan finishes
Discharge fees
A small minority of lenders may not pass on the admin costs associated with ending your loan either when you pay it off in full or if you refinance and move to a different lender, however 96% of the loans on Canstar’s database do. These discharge fees can range from $150 to $795, with the average at $329.
Home loan fee levels among lenders on Canstar’s database that charge/advertise a fee
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| Min | Average | Max | % Of Loans That Charge A Fee* |
|
|---|---|---|---|---|
| Application Fee | $150 | $487 | $990 | 39% |
| Valuation Fee | $200 | $256 | $349 | 19% |
| Legal Fee | $200 | $321 | $440 | 18% |
| Settlement Fee | $100 | $234 | $499 | 41% |
| Annual Package Fee |
$199 | $374 | $399 | 97% |
| Ongoing Monthly Fee |
$6 | $9 | $15 | 14% |
| Discharge Fee | $150 | $329 | $795 | 96% |
Source: www.canstar.com.au – 31/03/2025. Based on owner occupier variable loans on Canstar’s database available for a loan amount of $600,000, 80% LVR and principal & interest repayments; excluding introductory and first home buyer only loans.*Valuation, legal, documentation and settlement fees are often calculated at cost; the values in this table are based only on lenders that advertise a fixed value.
Owner occupied
20% min deposit
Redraw facility
Owner occupied
10% min deposit
Redraw facility
How to measure the true cost of home loan fees
Clearly there are plenty of home loan fees to be on the lookout for, especially as they can vary between different lenders and even among different loan products from the same lender. So, how can you work out which offers better value: a loan with a low rate and high fees, or a loan with a more expensive rate that charges little or no fees?
Fortunately, there is a way to get a better sense of the impact of mortgage fees so that you can compare like with like. The answer lies with home loan comparison rates.
As the Federal Government’s Moneysmart website explains, the comparison rate includes the home loan interest rate and factors in the cost of most fees and charges relating to the loan. In this way, it brings the overall cost to a single percentage figure—which is the comparison rate. It helps you get a clearer picture of the true cost of a loan, and enables you to get a more accurate comparison between home loans.
Another point to bear in mind is whether additional features offered by the loan can justify the fees charged. An example could be paying a higher fee for a loan that provides you with an offset account, which could enable you to reduce your interest costs, or a redraw facility, which could help you pay off your home loan faster. In this instance, it could be worth calculating your interest savings and whether they outweigh the higher fees.
Other home loan fees you need to know about
Some home loan fees/charges aren’t factored into the comparison rate as they may only apply in certain circumstances. These typically include:
- Lenders Mortgage Insurance (LMI): Not a fee as such, but a potentially hefty cost incurred by some borrowers with a low deposit and low loan-to-value ratio (LVR) when taking out a home loan. This is typically charged to borrowers with a deposit less than 20% or an LVR which is higher than 80.
- Late payment fees, also called a default fee, which can be payable if you fall behind with your regular home loan repayments.
- Break fees, or break costs, which usually kick in if you break out of a fixed-rate home loan before the fixed-rate term is over.
- Redraw fees that may apply if you make use of a redraw facility.
The main point is to check out the home loan fees you may be asked to pay on a home loan, use the comparison rate to get a clear idea of the cost of different loans, and understand your style of home loan management to give you a better idea of the other types of fees you could be asked to pay.
If you’re looking to take out a home loan, you can compare home loans with Canstar. It’s important to read all the relevant documentation, such as the Product Disclosure Statement (PDS) and Target Market Determination (TMD), for any home loan you are considering. Since taking out a home loan is a large financial decision, it’s recommended to obtain professional financial advice before doing so.
Cover image source: fizkes/Shutterstock.com
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
Owner occupied
30% min deposit
Redraw facility
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