When it comes to purchasing a property, it’s important to discuss the fees that a lender can impose so that you’re aware of these when narrowing down your home loan options. Lenders can charge you various upfront home loan fees, annual or ongoing fees to maintain the mortgage and discharge or exit fees when you end the loan or refinance. These fees have the potential to end up costing you thousands of dollars over the life of the loan.
Upfront fees
Given that a loan is a very important transaction, there are many fees and charges to look over and understand. When looking for a home loan you should firstly enquire and confirm the upfront fees applicable. Most lenders should be able to provide a list of these fees at the initial application stage. Across lenders, loan products will generally require some form of upfront costs to set up your loan and finalise the transaction, including:
Establishment or application fees
A one time fee charged at the beginning of your home loan application for the processing and documentation of your loan. This is generally a one-off, non-refundable payment.
Valuation fees
Another one time fee, charged to cover the cost of your property being valued by the lender.
Settlement fees
Charged when you first take out a home loan or if you decide to refinance to a new loan.
Other upfront fees include:
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Conveyancing fees - handled by a legal professional, conveyancing is the process of transferring ownership of a legal title of land from the seller to the new owner - you.
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Lenders mortgage insurance fees - If your deposit is smaller than 20% you may need to pay thousands in lenders mortgage insurance.
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Government fees - the government will charge you a fee to cover stamp duty on your home loan. These fees will vary based on certain factors and is typically paid upon settlement of the loan. These factors include:
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Whether you’re a first home buyer
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The cost of your property
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The state or territory you call home
To take the guess-work out of stamp duty for your new home loan, our stamp duty calculator can help you crunch the numbers.
Calculate stamp duty
Annual or ongoing fees
Annual fees are another cost to be aware of when choosing a lender. Dependent on the product, annual fees might be applicable, and you will be charged this fee each year for the duration of the loan.
When it comes to annual or ongoing fees, there are two main fees lenders use:
Monthly fees
These fees go toward the servicing and administration of the loan and can include charges for redraw facilities or any prepayment fees on a fixed rate loan.
Annual fees
Lenders will charge annual fees on package home loans, which usually offer a discount on the interest rate and other financial products offered by the lender including credit cards.
Some loan products will also charge an account keeping fee. It is important that you make sure that you are mindful of such fees as these will make a difference to you over the life of your loan.
Discharge or exit fees
Finally, discharge or exit fees are a cost that you must always enquire about, to determine how much you will be charged if you decide to leave that lender. Whilst deferred establishment fees are now abolished, most lenders will still charge a fee if you decide to leave, due to the work required to discharge your mortgage.
Discharge fees
If your mortgage is paid in full, you will be required to pay discharge fees that cover the finalisation of the mortgage process.
Settlement / Agent Fees
This fee is usually charged by your lender for their agent to attend your settlement, whether it be physical or online.
Fixed rate break cost
Breaking a fixed rate home loan generally attracts a penalty which is determined by the market. Actions that break a fixed-rate contract are switching to a different product, exceeding the extra repayment limit and repaying the loan in full.
When looking for a home loan it pays to find a lender that has a great rate, but it is additionally important that you are conscious of a range of hidden fees, as they too will dramatically impact your financial position over the life of your loan. Evaluating the comparison rate of a home loan is a good indication of the true cost loan, as it takes into account loan fees allowing you to compare rates across lenders.
Here at loans.com.au, there are no fee headaches, meaning you won’t pay anything across application fees, ongoing fees or repayment fees. Intrigued? Check out our range of home loan options here.
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