Home Loan Fees and Charges

The costs involved with buying a home and the number of fees that you are eligible for are daunting to say the least. After the deposit, the biggest initial outlay, the potential add-on costs will need careful consideration and planning for. Collectively, these costs make up a combination of lender fees (fees by the lender for their time and services) and government fees (fees that apply regardless of the lender you choose) and are based on the value of the property and the state you live in; these include: stamp duty, legal costs, application fees and any insurance that is associated with buying a property.

You Can Expect To Incur Fees:

When you need to pay Stamp Duty on the purchase of a Property
When buying land in state of Australia, which includes buildings, you are liable to pay the government a tax known asstamp duty (named because historically a physical stamp was attached when the duty had been paid for). With the amounts varying between the states, the payable amount is based on the market value of the property or its purchase price (whichever is greater).

When you need to pay Stamp Duty to take out a Mortgage
In order to make a mortgage document legal, in Australia, they attract stamp duty. The stamp duty is paid on your behalf, by your lender, to the applicable state authority and is determined by the size of the loan. Again, this amount varies in each state and depending on the state you are in; the duty may not apply if you are refinancing your loan.

When you need to Register a Property
When a property changes ownership, a Transfer of Land document is lodged and registered with the relevant State Titles Office. This document serves to record the change of hands and incurs a title registration cost and your solicitor/conveyancer should perform this task on your behalf.

When you need to Register a Mortgage
On top of the fee associated with the land transfer, you must also pay the government to register your mortgage document. In most cases, your lender will pay the cost to the appropriate State Authority on your behalf.

When you need to get a Title Search
To allow the property to change ownership, or become refinanced, a search of the Certificate of Titled is conducted in the Titles Office and this search involves a fee. This search ensures that the details of the certificate are correct and that there are no encumbrances on the title (which would include things like home loans, caveats and restrictive covenants, to name a few).

When you need to hire Solicitors or Conveyancers
The documentation and settlement process includes much legality and can be quite intricate. It is therefore advisable that you seek the guidance of an expert when making one of the biggest purchases in your life so that everything is completed correctly. The fees associated will vary from place to place and are mainly determined by the amount of time and the work that is required.

When you need Building/Pest Inspection & Surveys
It is smart practice and in your best interest to employ the services of a professional to provide you with a building and pest inspection report associated with the property you intend to purchase. The building report should clearly detail any structural problems or issues, such as dampness or water leakages. By having this report completed you may decide not to go ahead with the purchase or negotiate an adjustment to the purchase price or that repairs are undertaken.

In the same vein, a pest inspection should clearly state any existence of pest infestation in the property (e.g. ants or termites) and the recommended treatment for getting rid of it.

A survey, as requested by your solicitor or conveyancer, is intended to confirm that the house is positioned correctly in the right block and the boundaries of the house are accurate. It will also serve to confirm that the house has been built according to the regulations of and approved by the local council.

When you need to make a Loan Application
Typically, most lenders will charge a Loan Application fee. Varying from lender to lender, it can range from nil – $700 for a standard home loan. The loan serves to help settle the lenders costs of documentation, search, loan approval, valuation and process and is an up-front, one off payment.

When you need Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI) is a cost that the lender requires the borrower to pay to cover the event that the borrower (you) defaults on the home loan. This way the lender is protected in the instance that the property sells for less than the outstanding loan amount. Lenders will insist on this insurance if you borrow an amount that is greater than 80% of the amount the property is valued at. LMI is only payable once the loan commences and protects the lender for the life of the loan.

When you need to get Building Insurance
It is wise to check with your solicitor or conveyancer about what type of cover is applicable to you because the responsibility for insurance and risk of loss varies from state to state. It is imperative, however, that you have your building insured at the time of settlement otherwise lenders may not choose to make your loan available. It is therefore sensible to insure the property as soon as the purchase contracts are exchanged.

When settlement takes place (Settlement Fee)
Settlement occurs at the conclusion of the mortgage transaction. The home buyer, seller and the lender will meet to exchange funds and the deeds for the property title. In most instances, the lender will charge a fee for processing the settlement.

When you need to pay Standard Monthly or Annual Fees
These fees include maintenance and ongoing costs of the loan and are charged for the life of the loan.

When you need to make a Redraw
A redrawing fee will apply when additional funds are taken out and there may be a redraw restriction on the minimum amount that can be redrawn.

When you pay Additional Repayment Fees
Making additional repayments into your loan will incur a fee.

When you need to Exit
If you chose to discharge your loan, you are entitled to pay an exit fee.

When you need to make a Deferred Establishment
If you repay your loan in full but discharge the security within 5 years of the date of loan funding, you will be required to pay a deferred establishment fee. However, if you repay the loan in full and do not discharge the security, the deferred establishment fees do not apply.

When there is a Variation of the Loan/Splits (after the loan is drawn up i.e. after settlement)
This fee may be charged if you request to make a change to your loan product, loan limit, repayment frequency, repayment type or repayment amount. Making a security substitution or adding an additional security will also induce the fee.

Featured Low Fee Home Loans

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
Bankwest Online Home Loan	Featured home loan with a low ongoing fee and a low interest rate.	5.97%	5.97%	$0 / $0	80%	$100,000 / $1,000,000
Loans.com.au – Dream Loan Express – Variable Home Loan (80.01% -95%)	A low rate home loan with no application and service fee. Offer valid for limited time.	6.20%	6.22%	$0 / $0	80.01% – 95%	$50,000 / $750,000
ME Bank Members Package – Eligible members with a Member Package	A low rate home loan with a low ongoing fee.	6.19%	6.19%	$0 / $395	80%	$50,000 / $2,500,000
State Custodians Mortgage Company Breathe Easy Offset Loan	The Best Non Bank Basic Variable Loan of 2011	6.27%	6.18%	$0 / $0	95%	$150,000 / $1,000,000
Illawarra Home Loans Bank Beater Home Loan	A low variable rate, beaten down even further by 0.05% p.a. after 5 years.	6.07%	6.35%	$0 / $345	90%	$250,000 / $1,000,000

When you decide not to proceed (Non-proceeding Fee)
In the event that the borrower does not proceed with the loan after the valuation has taken place, a non-proceeding fee will be charged. The borrower may also expect additional fees if loan contracts have already been prepared.

Home Loan Fees Now And In The Future

While this may seem like quite a comprehensive list, and you certainly don’t want to know about any more fees that there might be, this list is just an indication of common home loan fees and you may not have to pay all of these on your home loan, but there may be others tucked away in the fine print you should be aware of. However you can start by finding out more about the following home loan fees such as:

• Additional repayments fee of around $75. If you choose a home loan which does not allow you to make additional repayments for free then you could be charged up to $75 each time you make an additional repayment to your loan so don’t assume that this feature is included.
• Banks legal fees of around $300. At the settlement of your home loan your lender may have a solicitor present as a requirement for the handover of your loan amount and the fee for the solicitor can be between $100 and $300 if it is required at all.
• Bank cheque fee of around $15. You may need a bank cheque to cover costs from the vendor such as an outstanding rates or water bills so that property can be handed over in time for settlement. Your bank will organise for these costs to be paid from your loan by you will have to pay $10-$15 for a bank cheque.
• Exit fees can be thousands of dollars. Exit fees are typically highest when you get out of a fixed interest rate period before the end of the term, however if you also choose to refinance your loan you can be looking at tens of thousands of dollars in fees. Exit fees may also include a deferred establishment fee which is aimed at discouraging you from moving between low introductory home loan periods and can be around the cost of a $600 establishment fee.
• Split loan fee of up to $600. The loans have become very popular in the current interest-rate market and allow you to allocate the portion of your home loan amount to attract a fixed interest rate and the remainder keeps its flexible variable rate. Some lenders include this feature for free but you could be charged as much a $600 to split your loan, and you may be charged each time you split as some loans can be split up to 4 times.
• Loan repayment fees of around $15. To make your loan repayments you will have to transfer money via direct debit into your home loan and if your everyday transaction account is with another financial institution you can be charged up to $3.50 for each direct debit you make and if you are making your repayments weekly this can add up to $15 a month to your repayments. Instead consider the accounts on offer from your home loan provider as many lenders are willing to waive monthly fees on transaction accounts and even annual fees on credit cards if you have a home loan with them. Alternatively if you don’t want to pay with direct debit and don’t have easy access to a branch you can often pay your home loan repayments using Giro Post at the post office which can cost up to a dollar 50 each time. Even if you choose to make your home loan repayments using Internet banking in some cases you still can be charged up to $.20 per transaction.
• Document preparation and legal fees of around $300. Document preparation fees can be charged by your lender to cover the costs of them preparing your home loan documents before your contract is approved.
• Late payment fees. If you miss a payment on your home loan you are likely to be penalised either in the form of a higher interest rate being charged on the outstanding repayment amount or a flat fee.
• Ongoing fees around eight dollars a month. Not all lenders will charge a monthly fee on their home loans so even know eight dollars a month doesn’t sound like much it can add up over the life of your loan.
• Over-the-counter fees around $1.50 each. If you need to access your home loan over-the-counter you can be charged each time as lenders want to discourage branch use and move more banking online or over the phone.
• Portability fee of around $400. If you choose a portable home loan which can be transferred from your existing home to a new home which you buy then you may have to pay a portability fee which could be from $150 up to as much as $400 when you need to move your loan.
• Redraw fees of up to $50. Having access to the additional repayments you make to your loan can give you a safety net funds if you need it however not all lenders include free redraw and can charge you up to $50 each time you access additional funds in your home loan account.
• Security guarantee fee of around $200. If you need the help of a guarantor to put up security to ensure the approval of your home loan you can be charged around $200 for each borrower who is listed on the loan account.
• Rate lock fee of around $400. A lot can happen between the time you apply for your home loan and the time the loan settles so for around $400 you can have the interest-rate on your loan fixed until your first repayment.

Property Purchase Fees and Costs

Now you come to the costs which are charged on your actual property and these can add up to just as much as those fees charged on your home loan and commonly include:

• Government stamp duty. If you are purchasing an existing property or a block of land you will be charged stamp duty as a percentage of the purchase price and you will need to check with your local revenue office to find out the exact amount.
• Conveyancing costs. Processing the sale of a new home is obviously not something you do every day so you will need to enlist the help of a conveyancer who can walk you through all of the conditions of the contract of sale, as well a search for documents on the property to make sure there are no monies or at and that the property matches the plan, as well is making sure the vendor is legally allowed to sell the property. You can expect conveyancing costs to be around $1000 but processing the sale of your new home is not something you want to worry about and especially not something you want to get wrong.
• Property inspections. To make sure you are investing your time, energy, your deposit and your fees into sound home you should consider conducting building and pest inspections before you settle on your contract. Building inspections can cost from between $300 to around $1000 and will check for structural issues. A pest inspection will cost you around $100 but is a smart investment as issues with white ants or borer can cost you a lot more. It is also important to check whether any unauthorised work or extensions have been done to your property and you can conduct a council building inspection for around $50. Land survey for around $400 will tell you whether your property is properly contained within the boundaries of the land and whether there are any easements you need to be aware of.

Negotiating Your Mortgage Fees

Many consumers believe that they wont have any right to negotiate on things like mortgage fees. Yet they also dont seem to realise that without customers borrowing money, banks would go out of business.

If it means keeping your business, banks will begin to negotiate on your mortgage fees and even your interest rates if you have a strong enough case to bargain with.

Waiving Mortgage Fees New Loans

The monthly account keeping fee has to be one of the most unfair of all mortgage fees. This is a fee thats charged over and above the interest rate youre already paying and it is there as a service charge, apparently, to help the banks pay for the service, they provide you in giving you an account.

Before you sign up for a mortgage, ask if theres a possibility that this monthly fee can be waived. The lending representative behind the counter will automatically say no. Theyre trained to do this, but it doesnt mean it cant be done. They can pick up a phone and call a manager to request permission to discount or even waive those fees.

You will have a much stronger case to present to your bank if you do a little homework first and know what other banks are charging. If you can present your homework to them in writing to show that their competitor is offering you a better deal, theyll be more likely to negotiate.

This is also true for negotiating a discount on the advertised interest rate you see.

Waiving Mortgage Fees Existing Loans

If you already have an existing mortgage, the processes for removing mortgage fees are a little different. Every banks mortgage section has a team of trained customer retention staff. Their job is to keep their customers happy, and hopefully stop them from refinancing their mortgages over to other banks. If you already have a mortgage, you can ask to speak to a representative about the possibility of removing those fees from your account.

Keep in mind that the representative is very likely to tell you that you signed up for your mortgage that already included those fees, so nothing can be done about it. This isnt true.

Once again, take the time to do a little comparison shopping. Know what other lenders are offering and be aware of the interest rates, fees, and charges that apply to them. Then compare them to what youre already receiving.

Dont be afraid to let your bank know youll refinance if it means getting a better deal. Just be sure you keep your tone polite and word your enquiry as a friendly question. Treat the person youre talking to with respect and youll find theyre much happier to try and help you.

Fees on External Services

There are some mortgage fees that wont be negotiable. These may include valuation fees or even legal fees, especially if your lender uses external firms to complete these tasks instead of in-house teams.

Related Resources

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