The Costs and Fees of Home Loans: What to Expect

What You'll Actually Pay When Taking Out a Home Loan

Most home loan costs fall into three categories: upfront application fees, ongoing account-keeping charges, and exit fees if you leave early. Upfront costs typically include application fees ranging from $0 to $1,000, valuation fees between $200 and $400, and settlement fees around $150 to $300. Ongoing costs usually involve monthly or annual account fees, while exit fees apply if you discharge the loan or switch lenders during a fixed period.

The total you'll pay depends on the lender, the loan structure you choose, and whether you're buying as an owner occupier or investor. Some lenders waive application fees entirely, while others bundle costs into a loan package that includes an offset account and redraw facility for a single annual fee.

Application Fees and What They Cover

Application fees cover the lender's cost of processing your loan, including credit checks, document verification, and assessment. These fees range from $0 to $1,000 depending on the lender and loan type. Many lenders now waive application fees to attract borrowers, particularly for owner occupied home loans with standard features.

Some lenders charge higher application fees but offer lower interest rates or more flexible loan features. Consider a couple refinancing a $500,000 loan who compare two options: Lender A charges no application fee but offers a variable rate of 6.30%, while Lender B charges a $600 application fee with a rate of 6.10%. Over 12 months, Lender B's lower rate saves $1,000 in interest, more than offsetting the upfront cost. The loan amount and rate difference determine whether paying an application fee makes sense.

Valuation Fees and How They're Calculated

Lenders require a property valuation to confirm the security is worth the loan amount you're requesting. Valuation fees typically range from $200 to $400 for standard residential properties, though they can reach $600 to $1,000 for rural land, large acreage, or properties in remote areas. The fee depends on property type, location, and whether the lender uses a desktop valuation, kerbside assessment, or full inspection.

Most lenders add the valuation fee to your upfront costs, though some absorb it as part of a package deal. If you're applying for a home loan with a loan to value ratio below 80%, some lenders waive or discount the valuation fee. When comparing loan options, ask whether the valuation is included or added separately, as this affects your total upfront expense.

Lenders Mortgage Insurance and When It Applies

Lenders Mortgage Insurance protects the lender if you default on a loan where your deposit is less than 20% of the property value. LMI can add several thousand dollars to your upfront costs. For a $450,000 loan with a 10% deposit, LMI might cost between $10,000 and $15,000 depending on the lender and your profile. You can pay this upfront or capitalise it into the loan, though the latter increases your loan amount and the interest you pay over time.

LMI is calculated based on your loan to value ratio and the size of your loan. A couple purchasing an investment property in Queensland with a 15% deposit would pay less LMI than the same couple with a 10% deposit, even if the property price is identical. If you're close to the 20% deposit threshold, increasing your deposit slightly can eliminate LMI entirely and save you thousands. You can explore your borrowing capacity to understand how deposit size affects your loan structure.

Ongoing Account Fees and Package Costs

Many lenders charge ongoing fees to maintain your loan account. These can be structured as monthly account-keeping fees of $10 to $15, annual package fees of $300 to $400, or a combination of both. Package fees often include additional features like an offset account, redraw facility, and fee waivers on credit cards or transaction accounts.

Whether a package fee represents good value depends on how you use the included features. If you maintain a linked offset account with a balance that reduces your interest charges by more than the annual fee, the package pays for itself. If you don't use the offset or other features, you're paying for benefits you're not accessing. Some lenders offer no-frills variable rate loans with no ongoing fees, which suit borrowers who prefer lower costs over additional features.

Exit Fees, Discharge Costs, and Break Fees

Exit fees apply when you pay out your loan in full, either by selling the property or refinancing to another lender. Discharge fees typically range from $150 to $400 and cover the administrative cost of removing the mortgage from the property title. These fees apply to both variable and fixed rate loans.

Break fees are different. They apply only to fixed interest rate home loans if you exit, refinance, or make extra repayments beyond the allowed limit before the fixed period ends. Break fees compensate the lender for the difference between the rate you locked in and the rate they can now lend at. If rates have fallen since you fixed, break fees can be substantial. If rates have risen, the break fee may be minimal or even zero. If you're considering refinancing during a fixed period, request a break fee estimate from your lender before proceeding.

Settlement Fees and Legal Costs

Settlement fees cover the cost of transferring the loan funds to the seller's solicitor and registering the mortgage on the property title. Lenders typically charge between $150 and $300 for settlement, though this can vary. Some lenders bundle settlement fees into their application or package fees.

You'll also pay legal costs separately to your conveyancer or solicitor, usually between $1,200 and $2,500 depending on the complexity of the transaction and whether you're in Queensland or another state. These costs sit outside the lender's fee structure but form part of your total expense when securing a property. Factor both lender settlement fees and legal costs into your budget when planning your purchase or refinance.

Hidden Costs That Catch Borrowers Out

Some costs don't appear on the lender's fee schedule but still affect what you pay. Rate discounts that expire after 12 months can increase your interest rate without warning, adding hundreds of dollars to your monthly repayment. Redraw fees, charged each time you access extra repayments, can cost $10 to $50 per transaction. Some lenders also charge fees for splitting your loan between fixed and variable portions, or for switching from principal and interest to interest only repayments.

In our experience, couples refinancing often discover their current lender charges a fee to provide a payout figure, typically $10 to $50. While small, these fees add up when you're comparing multiple loan options or managing a tight settlement timeline. Review the full fee schedule before committing to any loan product, and ask your broker to highlight any fees that apply to features you're likely to use.

If you're a first home buyer, understanding these costs upfront helps you budget accurately and avoid surprises at settlement. Call one of our team or book an appointment at a time that works for you to discuss which loan structure minimises your upfront and ongoing costs based on how you plan to use the loan.

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