Hidden fees and charges are no one’s friend. It can be incredibly disheartening planning to buy a home and discovering, once you are neck deep in home loan applications, that you haven’t accounted for half of the fees and charges you need to cover.
To avoid any costly surprises, we have prepared a list for you that details some of the fees and charges associated with home loans:
Application fee/up-front cost
Application fees can be dressed up with many different names, such as establishment, start-up and set-up fees, but the meaning is still the same; a one-off fee that is charged at the start of your home loan. If you are lucky, some lenders will waive this fee for you.
Loans with no up-front costs:
Ongoing fees are a type of administration fee which are usually charged monthly or annually.
Loans with no ongoing fee:
Additional repayment fee
Some lenders will allow you to make extra repayments towards your loan so you can pay it off earlier, but may charge a fee for the privilege. Always check for additional repayments fees if you are interested in paying off your loan ahead of schedule.
Loans with no extra repayment fee:
Late payment fee
When you sign up for a home loan, you will agree to a regular repayment date – if you do not make the payments on time, you could incur high late fees.
Break costs and exit fees
In July 2011, exit fees were abolished by the Australian government. However, if you signed a mortgage before this date, you could still incur exit fees.
Break fees apply if you have a fixed interest rate loan, but wish to break out of the loan before the agreed fixed rate period has expired.
Mortgage discharge fee
Mortgage discharge fees, also known as termination and settlement fees, are charged when you have paid off your home loan in full.
Some lenders will allow you to redraw extra money you have paid towards you home loan, but some charge a fee for doing so. If your home loan offers redraw facilities, make sure you enquire about any fees or redraw limitations that may apply.
Loans with no redraw fee:
At the end of your agreed fixed rate loan period, you may wish to re-fix your loan rate once again. Some lenders will charge a re-fix fee to do so.
At the beginning of your home loan term, you will agree on a variable or fixed interest rate. If you decide to switch from one rate type to another, you may be charged a switching fee.
Portability fees are incurred when you move your home loan over from one property to another.
Lender’s mortgage insurance
If you have less than a 20 percent deposit, you may be required to pay lender’s mortgage insurance – which can total into the thousands.
Further home loan costs
As well as the listed fees and charges, there are also government taxes and other expenses associated with home ownership, including stamp duty, mortgage and transfer registration, and land tax. To estimate your stamp duty charges and government fees, visit our stamp duty calculator.
For more information on the process of taking out a home loan, from beginning to end, walk through RateCity’s complete series of Home Loans Step by Step guides: