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Take advantage of falling Australian bank fees

Take advantage of falling Australian bank fees

There is no way of avoiding bank fees but you can certainly keep them at a minimum if you spend, save and pay smart.

Each year banks earn billions of dollars from household bank fees. The amount banks receive from household bank fees is money paid by households for fees charged on their financial products such as home loans, credit cards and personal loans.

The good news is, the Reserve Bank of Australia (RBA) reported the amount of household bank fees has been declining significantly since 2010. The decline in home loan fees has been occurring despite a 5 percent increase in mortgage lending in 2012. The RBA suspects this is due to many banks waiving their application fees and other fees, as well as the Federal government’s ban on exit fees for variable rate home loans in July 2011.

But despite the decline the Australian Banker’s Association reported that Australian banks still collected $11.3 billion in bank fees from households and businesses over 2012, with the average Australian household currently paying $8.94 per week in bank fees.

With home loans, transaction accounts and credit cards making up 90 per cent of household bank fees, Australian’s need to be savvy when it comes to reducing outgoing costs.

Tips for keeping your bank fees to a minimum

  • Shine a magnifying glass over your bank statements to ascertain where your fees are coming from.
  • Get organised: Avoid unnecessary and pricey late fees, ATM and overdrawn accounts fees.
  • Shop around for a better home loan or credit card deal: Look for ones with no monthly fees. 
  • In most cases, the more features the higher the fees so work out if you really benefit from all the features or could go without them for smaller fees. 
  • When applying for a home loan, make sure that you read the product disclosure statement (PDS) so that you are aware of all the fees and charges.

RateCity makes you smarter by comparison by allowing you to compare some of Australia’s best home loan and credit cards.

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Learn more about home loans

What fees are there when buying a house?

Buying a home comes with ‘hidden fees’ that should be factored in when considering how much the total cost of your new home will be. These can include stamp duty, title registration costs, building inspection fees, loan establishment fee, lenders mortgage insurance (LMI), legal fees and bank valuation costs.

Tip: you can calculate your stamp duty costs as well as LMI in Rate City mortgage repayments calculator

Some of these fees can be taken out of the mix, such as LMI, if you have a big enough deposit or by asking your lender to waive establishment fees for your loan. Even so, fees can run into the thousands of dollars on top of the purchase price.

Keep this in mind when deciding if you are ready to make the move in to the property market.

What is an ongoing fee?

Ongoing fees are any regular payments charged by your lender in addition to the interest they apply including annual fees, monthly account keeping fees and offset fees. The average annual fee is close to $200 however there are almost 2,000 home loan products that don’t charge an annual fee at all. There’s plenty of extra costs when you’re buying a home, such as conveyancing, stamp duty, moving costs, so the more fees you can avoid on your home loan, the better. While $200 might not seem like much in the grand scheme of things, it adds up to $6,000 over the life of a 30 year loan – money which would be much better off either reinvested into your home loan or in your back pocket for the next rainy day.

Example: Anna is tossing up between two different mortgage products. Both have the same variable interest rate, but one has a monthly account keeping fee of $20. By picking the loan with no fees, and investing an extra $20 a month into her loan, Josie will end up shaving 6 months off her 30 year loan and saving over $9,000* in interest repayments.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay.