What Are the Different Home Loan Fees in Australia?
Friday, April 21, 2023
/
Applying for a home loan is a practical way to purchase a house as it allows you to divide a major expense over several repayment periods. Through the additional funds loaned by a bank or lender, you'll no longer have to worry about spending a huge amount of money on a single transaction.
Of course, as part of your agreement with your loan provider, you'll have to settle your loan by making regular payments throughout a specified period. But, in addition to your weekly, fortnightly, or monthly repayments, there are also other fees associated with home loans.
Generally, these fees fall under three different categories: upfront, ongoing, and exit fees. These additional payments all go towards the processing of your application and the maintenance of your loan account.
But sometimes, in order to entice more clients to apply for home loans, banks and lenders waive some of these fees as part of their promotions. The only way to know the fees that come with your account is by carefully reviewing its terms and coordinating with your loan provider.
Upfront fees
Upfront fees are the costs that you have to pay as you begin your loan application. In most cases, these fees are part of the lender's approval process.
Application fees
The application fee is a one-time fee that's charged at the start of your home loan application. It covers the costs associated with the documentation and processing of your loan. This type of fee is usually non-refundable, and it is one of the most common charges waived by banks to entice new customers.
Property valuation fees
As its name suggests, a property valuation fee is charged by the lender to cover the costs associated with the assessment of a property's value. It serves as a safeguard for both the lenders and clients to ensure that the loan amount is appropriate for the value of the property or home that will be purchased. Aside from its value, other factors, such as the property's location and type, will determine the cost of a property valuation fee.
Conveyancing fees
Conveyancing fees cover the cost of transferring the ownership of a legal title of land from the seller to the new owner. This process is typically handled by a solicitor or a conveyancer.
Government fees
Aside from the lender, the Australian government can also charge you for your home loan's cover stamp duty. The stamp duty is a state government tax that covers the associated costs of changing a property's title and ownership.
Mortgage registration fees
State and local governments also typically charge mortgage registration fees. These fees are used for the registration of physical properties as the security on a home loan. Through this process, future buyers can check any existing claims on the property.
Search processing fees
Lenders can charge a search processing fee to cover the cost of performing title searches or other actions related to your home loan application.
Lenders mortgage insurance
The lenders mortgage insurance (LMI) is a type of insurance policy that protects lenders from potential losses that they may incur in case borrowers fail to repay their home loans. Although you'll generally no longer worry about LMI if your deposit on the property is over 20%, this matter will still depend on the preferences and provisions of your chosen lender.
Ongoing fees
Aside from your regular repayments, there are also other fees that you have to settle during the duration of your home loan term.
Monthly service fees
One of these is the monthly service fee, which the bank or lender uses for the service and administration of your home loan account.
Annual fees
An annual fee is usually charged for a home loan that's part of a package deal. In most cases, the purpose of this type of fee is to compensate for the reduced interest rate or other discounts that come with your loan package. Sometimes, lenders waive the annual fee for the first year to attract more customers.
Redraw fees
Some lenders and loan packages provide you with an option to withdraw the additional payments you've made during the course of your loan term. But, you'll most likely be charged a redraw fee whenever you do this. Fortunately, there are lenders that don't charge redraw fees.
Late payment fees
If you fail to settle your regular repayments on or before the specified due dates, you'll most likely be charged a late payment fee. Usually, though, lenders provide a grace period following the deadline to allow customers to still make their repayments without being penalized. But, if you think that you'll no longer be able to repay your loan due to your financial situation, make sure to get in touch with your lender so they can freeze your account.
Switching fees
The most common types of loan options you'll encounter in Australia are fixed-rate and variable loans. The former comes with a fixed interest rate, while the latter has a variable one, which changes based on the current market trends. Since both options have their own advantages and disadvantages, you usually have the option to switch from a fixed-rate home loan to a variable one. But, keep in mind that your lender may require you to pay a switching fee if you do so.
Portability fees
In some home loan options, you're allowed to change the security of your loan, which, in this case, is the property. But, if you choose to do so, you'll be charged a portability fee.
Exit fees
Finally, exit fees are the additional costs you'll most likely have to settle once you reach the end of your loan term.
Home loan exit fees
Home loan exit fees were already banned on July 1, 2011, during the time of former Australian Prime Minister Julia Gillard. But, those who applied for home loans before this date may still get charged home loan exit fees by their lenders.
Discharge fees
Discharge fees are usually required by lenders if you decide to pay off your loan in full. These fees cover to cost of completing the entire process and handling the necessary paperwork. Discharge fees are also called settlement or termination fees.
Early exit fees
An early exit fee is charged by a lender if you pay off your loan within a specified period. According to the law, this type of fee is limited to the recovery of a lender or credit provider's loss due to the early exit.
Fixed-rate break costs
If you have a fixed-rate home loan, actions such as exceeding the limit on repayments, switching to a different loan product, or repaying the loan in full break the loan's contract. This can result in fixed-rate break costs, which include the discharge fee and an early exit fee.
Although these seem like a lot of fees, don't let them discourage you from getting your dream house and applying for a home loan. As mentioned earlier, many of these fees are usually waived by lenders as part of their promotion, and most of them are only one-time fees.
If you're looking for home loan packages that have unlimited repayment options, discounted interest rates, unlimited and free redraws, or no monthly account-keeping fees, then make sure to get in touch with BankWAW.
We offer variable and fixed-rate home loan options that have various incentives. As a community-owned credit union, we'll help you find the best loan option that suits your needs, preferences, and financial capacity.