Home loan fees and charges

When you apply for a home loan, you will most likely be liable for a range of fees and charges in relation to your home loan application. You should plan for the following lender and legal fees and government and statutory charges. Of course you may also be liable for various other fees associated with the purchase of property or moving property. Your mortgage broker can confirm which fees will be applicable once they understand your specific needs.

Bank and lender fees 

Entry/setup – application fee

Also called an establishment fee, an application fee is charged by the lender to cover the initial costs of processing your home loan application. Depending on the lender, this fee may cover additional costs such as property valuations.

Entry/setup – lenders mortgage insurance (LMI)

LMI is usually required when the Loan to Value Ratio (also known as LVR, the value of the loan amount opposed to the value of the property) is greater than 80%. LMI protects the lender from any losses that may occur as a result of a default by the borrower (i.e. the borrower forgoes repayments). Please note LMI does not offer any protection to the borrower.

Entry/setup – valuation

A valuation is an assessment on the market value of a property at any given time. Lenders may order a valuation on the property you intend to purchase or use as security for your home loan. The cost of valuations may be included in your application fee or there may be an additional charge from the lender.

Exit – deferred establishment fee

Also called an early termination fee, this may be payable if you discharge your home loan within a specific timeframe, usually up to about five years. Even if you have paid application/establishments fees at the commencement of your loan, you may still be liable for deferred establishment fees. This is because the lender absorbs or ‘defers’ some costs associated with setting up your loan, which they claim back if you discharge within a set time frame.

Exit – deferred settlement fee

Payable on early discharge, a deferred settlement fee works in a similar way to a deferred establishment fee. At the time of settlement, the lender absorbs some of the costs associated with settling your loan. If you discharge your loan early, usually within the first five years, the lender will claim these costs back from you.

Exit – discharge fee

Sometimes called an exit fee, a discharge fee is payable at any time you discharge your home loan. This fee covers the administration costs of preparing your loan discharge documents.

Exit – penalty interest

Payable on fixed loans for early discharge. When a lender agrees to a fixed term loan, they are relying on the loan being held for the full term in order to recoup their own costs for funding the loan. Penalty interest may be charged on a variable rate home loan in some cases, but this is unusual.

Ongoing fees – account keeping fees

You may incur account keeping fees on your home loan account. Account keeping fees will usually be added monthly to your home loan account.

Ongoing fees – package fees

If you have your loan packaged with other banking products, such as a savings account and credit card, you may be charged an annual fee to cover the costs of the package. Generally if you are paying package fees, you will not be charged account keeping fees or credit card membership fees.

Other lender fees  

Account transaction fees

You may be charged a fee for certain account transactions, such as redrawing money from your home loan. These fees are usually based on usage.

Switching fees

A switching fee may be charged if you switch from one product to another within the same lender eg. variable rate to fixed rate home loan. This fee covers the administration costs of the lender.

Government and statutory charges for mortgages

Transfer stamp duty

Transfer stamp duty is payable to your State Government on the purchase price of the property. It’s generally due between the date of settlement and three months after the exchange of contracts. Check your contract for confirmation of due dates.

Mortgage stamp duty

Mortgage stamp duty is payable to your State Government on the amount secured by your mortgage. It’s generally due upon settlement.

Mortgage registration fee

A Mortgage registration fee is payable when a mortgage is either established or discharged against a property.

If you are a first home buyer, you may be eligible for discounts and concessions on these fees, as well as assistance with federal and state grants.

Legal fees

Legal fees relate to the legal processing of your property purchase by a qualified conveyancer or solicitor. There are generally two components to the conveyancing fee charged by a solicitor or licensed conveyancer: a legal fee and a disbursement fee. Legal fees cover the time and skill of your solicitor/conveyancer; disbursement fees cover any costs incurred by your solicitor/conveyancer in conducting enquiries and searches on your behalf. Depending on the number of searches that your solicitor conducts, this is likely to affect the final cost.

Moving costs

Building/pest inspection

Before buying you should arrange a pest and building inspection. A building inspection should provide information on any major structural problems/faults. A pest inspection will identify any pests such as termites that are present in the property. You may be able to use these findings to negotiate a lower purchase price, especially if any repairs/treatments are required to fix a problem. The cost of an inspection will vary depending on the level of assessment you request, but a basic report will start from around $500.

Rates

You will be liable to pay rates on the value of your property to your local Council on whatever portion of the quarter remains after settlement. Your rates generally include sewerage and water costs, as well as a charge against your property to help pay for local infrastructure. Costs vary widely depending on the area you live in and the value of your property; you will need to check with your Council about how much you will be liable for.

Strata fees

If you purchase in an apartment block or managed community, you will be liable for strata fees to help maintain shared areas such as the building exterior, gardens, pools etc. Many real estate advertisements will detail the cost of these fees, and they will also be noted in your contract of sale.

Utilities connections

It can be surprising to add up the services you need to disconnect and reconnect when you are moving; telephone, electricity, water, gas, subscription TV and the internet are all counted as utilities connections, many of which require a substantial bond to be paid prior to connection.

Moving

When you purchase a new property to live in, don’t forget to add in the costs associated with moving to your new home. Depending on how far you are moving, the costs can add up to a few thousand dollars. This may include:

• Removalist or hire of truck/van for self-removal
• Boxes and packing tape
• Petrol for your car
• Transit insurance

For more information on home loan fees and charges

For more information on fees and charges associated with your home loan application and property purchase, or the home loan that is in your best interest, talk to your local mortgage broker and we will return your enquiry within 2 business hours. Or call us at any time on 13 LOAN or direct on +61 2 9249 3739.