Can you really get a no-fee home loan?
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.
How much can you save with no ongoing fees?
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.
Ongoing fee versus no ongoing fee
Let's compare 2 mortgages.
- Loan 1. A basic home loan with an interest rate of 6.00% p.a. and a $400 application fee.
- Loan 2. A package home loan with the same 6.00% interest rate. It has no application fee but does have a $250 annual fee.
|Loan 1||Loan 2|
|Interest rate||6.00% p.a.||6.00% p.a.|
|Loan term||30 years||30 years|
|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.
How to compare home loans with no ongoing fees
- Look at all the loan fees. A lender might waive monthly or annual fees but still charge fees for offset or redraw facilities, which might add to the cost of your loan.
- Look at the interest rate. The interest rate has a much bigger impact on your loan costs than fees. A lower rate means lower interest charges. Compare the interest rate against other, similar loans to make sure you're getting a good deal.
- Look at the loan's features. Paying less in fees is good. But you should consider other features that come with the loan. Using a home loan's offset account could help you save a lot in interest charges, outweighing the cost of fees. A loan that allows for additional repayments could help you get out of debt sooner.
What other home loan fees do lenders charge?
Aside from monthly service fees and application fees, lenders often charge:
- Valuation fees. Lenders often get a professional valuation of your property before approving your loan.
- Legal fees. Lenders often charge a fee to cover their legal costs during loan settlement.
- Discharge fees. Some lenders charge you a fee when you end the loan contract.
- Break costs. This fee only applies if you exit a fixed rate loan before the fixed period ends. Break fees can cost hundreds or thousands of dollars and depend on various factors including your loan size, how much is left on your fixed period and current variable rates.
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.
Do all home loans have fees?
There are actually some home loans in Finder's database that have no fees at all.
Lenders that charge no fees
- Unloan. This online lender charges no fees at all.
- Up. A mobile-only lender (you have to use the Up app), Up has no fees on its home loans.
- Athena. This online lender does not charge any fees.
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.
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