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Home Loan Fees

Marty McDonald - Monday, June 20, 2011

What are the most common home loan fees and how much are they? While every lender is slightly different and has different names for their fees I have summarised the most common home loan fees payable by borrowers below.

 

Upfront application fee OR ongoing annual fees:

Usually a borrower has the choice between paying a once off application fee of around $600 for a basic loan or paying an ongoing fee of around $375 per annum for a professional package loan. Although called application fees they should actually be called settlement fees as they are usually paid when a loan actually settles rather than when a loan is applied for.

The "professional package" or just a plain old "package" if you prefer entitles the borrower to discounts off the standard variable interest rate based on total borrowings as well as automatic application fee waivers and access to additional features such as an offset account and a fee free credit card.This is great for borrowers with more than one loan (as application fees are waived on all loans and discounts are based on the total of all loans). The interest rates on professional packaged loans and basic loans are often similar for loans of between $250,000 and $500,000. For larger loans a professional package loan will usually have lower rates. While for loans less than $250,000 often the basic loan will have a better interest rate. Lenders also often have special offers where they waive the loan application fees on their basic home loans. This can be particulary attractive if you just want a no frills basic home loan and don't need a large loan.

In the end it is usually a case of weighing up the pros and cons of having the additional features offered under a professional package while also considering the overall cost differences between the two loan options. We can assist you with this decision making process by eliminating the "smoke and mirrors" that lenders seem to put in place to make the decison more difficult than it needs to be.

Ongoing monthly fees:

A rarity these days however sometimes still applicable. Can range from $10 to $25 per month.

Lenders mortgage insurance (LMI):

This is not really a fee but it feels like one. LMI generally applies to those borrowing more than 80% of the value of a property or more than 60% to 70% for lo doc loans. The cost of LMI can be anywhere from $1000 to $25,000 depending on the loan amount, loan type and loan to value ratio. I have covered this in detail for those interested here.

Property valuation fees:

Usually the first valuation is free with the majority of lenders. Those in the minority will charge you around $250 for a standard residential property. Second and subsequent valuations are charged at market cost which is again around $250 for a standard property. Those borrowers with a professional package sometimes are entitled to have all their valuation fees waived.

Bank legal fees / settlement fees:

Either around $300 or absorbed by the lender. Often a lender will charge a settlement fee which is around $150 per loan which goes towards the legal cost of setting up a loan.

Variation fees:

These are home loan fees that are charged when you make a change to your loan contract after its established. This could be switching from a variable rate loan to a fixed rate loan or changing the name of a borrower for example. Most lenders charge around $300 per variation.

Mortgage discharge fees:

Not to be confused with exit fees (below) these are legal fees to prepare for the discharge of the mortgage lodged against the title of your property that the lender holds as security for their loan. Usually the fees for this is around $300 to $500.

Early exit fees / exit fees:

Exit fees are set to be banned from 01/07/2011 and most lenders have moved to abolish them already. Some lenders have abolished exit fees for existing loan contracts while others haven't been quite so generous. Exit fee range from $700 to $10,000 depending on lender and circumstances. Contact your lender and request a payout figure including all exit costs to be sure.

Summary:

So that's it really, a guide to the most common home loan fees in Australia today. As we like to say all lender are same same but different. They certainly all have there own quirks so please use this as a guide only and contact us for a more accurate loan quote at any time.

Thanks for reading,

Marty McDonald

About the Author: Marty McDonald is principal of mortgage broker “Mortgage Experts”. Marty specialises in assisting active property investors with loan structuring advice and implementation as well as helping credit worthy borrowers with slightly outside the box income and employment situations. Find Marty on and LinkedIn.

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