Most home loans have a few fees. Lenders charge fees to cover the costs of processing applications, valuing a property or paying a conveyancer to handle settlement.
Some lenders charge a monthly fee for maintaining the loan account, especially if the loan has a 100% offset account.
But many lenders now charge minimal fees, and some genuinely charge no fees at all.
If a home loan has an upfront application fee, it will probably cost you $400–$600. But a home loan with an ongoing monthly or annual fee could cost you thousands over the life of a loan.
Here's a simple example.
Let's compare 2 mortgages.
| Loan 1 | Loan 2 | |
|---|---|---|
| Interest rate | 6.00% p.a. | 6.00% p.a. |
| Loan term | 30 years | 30 years |
| Set-up fees | $400 | $0 |
| Ongoing fees (p.a.) | $0 | $250 |
| Total cost of fees over 30 years | $400 | $7,500 |
In the end, the annual fee ends up being much more expensive over 30 years. Of course, a package home loan comes with other benefits, such as a credit card and offset account. So the fee may be worth it, depending on your needs.
Aside from monthly service fees and application fees, lenders often charge:
Learn more about different mortgage fees
While your lender won't charge these fees, there are other costs you'll pay when you settle the mortgage, such as your conveyancer's fee and a mortgage registration fee that your state or territory government charges.
There are actually some home loans in Finder's database that have no fees at all.
There are many other lenders that have close to zero fees, but may charge a valuation fee if the valuation costs exceed a certain limit. Online lender Tic:Toc, for example, has a discharge fee when you end the home loan and a small monthly fee if you add an offset account.
Taking out a home loan can seem like a huge mountain to climb. But when you break it down into these 10 key steps, it becomes much easier.
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