Home Loan Fees

Lenders charge you various upfront home loan fees when you get a mortgage, ongoing fees to maintain the mortgage account and exit fees when you end the loan or refinance. These fees can end up costing you thousands of dollars over the life of the loan.

The average cost of upfront fees alone is $686, based on an average of the all the loans in Finder's database.

To help you understand mortgage fees (and how to avoid them) we've examined each category of fees.

• Upfront fees
• Ongoing fees
• Exit fees

Upfront fees

Many loans will come with various fees to be paid upfront. These can be expensive, and will impact the overall cost of the loan. But they're a one-off cost.

• Application fees. Also called establishment fees, these are fees that cover the cost of the documentation of the new mortgage. This is a one-off payment that can roughly cost between $200 - $700 depending on the loan, though many lenders waive establishment fees on some products or for special promotions.
• Valuation fees. This fee covers performing a valuation of the property you’re purchasing. This helps the lender ensure the amount you’re borrowing and the size of your deposit are appropriate. This fee can cost between $100 to $300, though some lenders offer a free valuation.
• Government charges. These are fees charged by the government to cover stamp duty on the mortgage. Stamp duty costs can differ depending on whether or not you're a first home buyer, what state you're in, and the cost of the property. You can use our stamp duty calculator to find out more.
• Conveyancing fees. The loan settlement process entails the transfer of a property’s title from the seller to the buyer. This process is known as conveyancing, and is usually handled by an accredited professional. Conveyancing fees usually run between $700 and $2,500.
• Legal fees. The loan application process includes a contract that has to be handled by a legal team. This fee covers those legal services and the preparation of legal documents for the home loan. This can cost upwards of $100 depending on the lender.

Others fees are charged by third parties such as solicitors, mortgage insurers or state or territory governments. While you may be able to avoid upfront fees from lenders, it can be harder to avoid fees charged by other parties in the mortgage process.

Other upfront costs to watch out for

The fees on this page are not the only costs associated with getting a mortgage. You should also keep in mind costs like:

• Stamp duty. The cost of stamp duty depends on your state, property value and whether you're eligible for a first home buyer concession.
• Lenders mortgage insurance. If your deposit is smaller than 20% you may need to pay thousands in lenders mortgage insurance.
• Conveyancing fees. Your conveyancer may charge between $500 and $2,000.
• Mortgage registration fees. A state government charge that costs between $145 and $187.

Check out our detailed costs guide for a full breakdown of all upfront property cost.

Ongoing fees

In addition to upfront fees, some loans also carry ongoing fees. These may be administrative fees, or fees for features the loan offers. Ongoing fees can make a significant difference to the overall value of a home loan.

Here are the common ongoing fees:

• Monthly service fees. These fees go toward the servicing and administration of the loan. Fees may include charges for redraw facilities or any prepayment fees on a fixed rate loan. This fee is usually between $5 and $15.
• Annual fees. Banks charge annual fees on package home loans, which usually offer a discount on the interest rate and other financial products offered by the lender. These annual fees are generally between $300 and $400.
• Redraw fees. Banks offer redraw facilities on some home loans, allowing you to withdraw any extra repayments you have made on your loan. You may be charged a small fee each time you redraw, which can cost approximately $50 per redraw.

Exit fees

When you discharge your home loan, there may be fees associated. Whether you’re discharging your home loan because you’re refinancing to another lender or because you’ve paid off your home loan in full, it’s important to be aware of some of the associated fees.

• Discharge fees. Once your mortgage is paid in full, you will be required to pay discharge fees that cover the finalisation of the mortgage process and the paperwork involved in the change of title. This usually costs $350 - $500.
• Fixed rate break costs. Breaking a fixed rate mortgage usually attracts a penalty which is determined by how much interest rates in the market have come down since you took up the fixed rate mortgage. These fees vary, but can run into the thousands of dollars. Here’s a look at how break fees are calculated.

How to avoid home loan fees

One of the easiest ways to reduce your mortgage cost is to keep loan fees down. Some loan fees cannot be avoided, but lenders may waive fees as part of special offers, so regularly compare home loans in the market to see what deals you may be able to make use of. Remember to compare home loans to know how often a fee is charged, so you know if you’re getting the best deal. You can check the fees tab in our reviews to do this.

Ask for discounts from your mortgage lender because you may sometimes be able to take advantage of waived application fees for a new home loan. LMI can cost you thousands of dollars, so the best way to avoid this is to ensure you putting down 20% of the home value as a down payment.

Keep in mind that if you’re refinancing home loans you may be able to negotiate with your new lender. Insiders report that it’s not uncommon for large lenders to offer rebates of up to $1,000 and discounts on interest rates, so be sure to ask. We also compare home loans which offer cash rebates when refinancing.

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Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 553 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips