The Hidden Fees Eating Into Your Home Loan

While interest rates get all the attention, fees can significantly impact the total cost of your home loan. Many borrowers focus solely on the interest rate and overlook charges that add thousands of dollars over the life of the loan. This guide exposes the hidden fees and shows you how to minimize or eliminate them.

Upfront Fees: Before You Even Start

Application/Establishment Fees

What It Is: A one-time fee to process your loan application and set up your account.

Typical Cost: $150-$600 (some lenders charge up to $995)

What to Know:

• Often waived for good borrowers or larger loans
• Negotiable, especially through brokers
• Sometimes bundled into other fees
• May be called "settlement fee" or "loan setup fee"

Negotiation Script: "I'm comparing several lenders and I've noticed some don't charge an application fee. Are you able to waive this for me?"

Valuation Fees

What It Is: Cost of professional property valuation for the lender.

Typical Cost: $200-$600 (depends on property type and value)

What to Know:

• Many lenders now waive or absorb this
• Second valuations (for fixed price contracts) may cost extra
• Complex properties (rural, unusual) cost more
• You usually don't receive the valuation report

How to Minimize:

• Choose lenders who use automated valuations (AVMs)
• Ask if upfront valuation is included
• Check if valuation fee is rebated with loan settlement

Legal and Settlement Fees

What It Is: Charges for preparing loan documents and settling the transaction.

Typical Cost: $200-$400 from lender (plus your own conveyancer costs)

What to Know:

• Some lenders include this in establishment fee
• Others charge separately
• Often non-negotiable
• Check what's included vs. additional

Mortgage Registration Fees

What It Is: Government fee to register the mortgage on your property title.

Typical Cost: $150-$200 (varies by state)

What to Know:

• Government charge, not lender profit
• Non-negotiable
• Applies in all states
• Separate from stamp duty

Ongoing Fees: The Slow Drip

Annual/Monthly Account Keeping Fees

What It Is: Regular fee for maintaining your loan account.

Typical Costs:

• Monthly fee: $8-$15/month ($96-$180/year)
• Annual fee: $150-$450/year

What to Know:

• Some loans have no ongoing fees
• Package deals have annual fees (see below)
• Fees often increase over time
• Basic loans typically have lower fees

30-Year Impact: $395 annual fee × 30 years = $11,850

Package Fees

What It Is: Annual fee for a "package" of products (loan + credit card + account + insurance discounts).

Typical Cost: $350-$450/year

What's Usually Included:

• Discounted interest rate (0.15-0.40% off)
• Fee-free credit card
• Fee-free transaction account
• Insurance premium discounts
• Offset account included

Is It Worth It? Calculate: Does the rate discount save more than the fee?

Example:

• Package fee: $395/year
• Rate discount: 0.20% on $400,000 = $800/year
• Net benefit: $405/year ✓

But if your loan is $200,000:

• Rate discount: 0.20% on $200,000 = $400/year
• Net benefit: $5/year ✗ (barely worth it)

Offset Account Fees

What It Is: Some lenders charge extra for offset account functionality.

Typical Cost: $0-$10/month

What to Know:

• Often included in package fee
• Some basic loans charge separately
• Worth it only if you'll maintain significant balance
• Compare to loans with free offset

Break-Even Calculation: At 6.5% interest, to save $120/year in fees ($10/month), you need only $1,846 in offset. If you'll maintain more, it's worth it.

Transaction Fees: Death by a Thousand Cuts

Extra Repayment Fees

What It Is: Charges for making additional payments beyond your minimum.

Typical Cost: $0-$10 per transaction (rare now but still exists)

What to Know:

• Most lenders now allow free extra repayments
• Fixed rate loans may have annual limits (not fees, but restrictions)
• Check your loan contract
• Can discourage beneficial behavior

Red Flag: Any loan charging for extra repayments is outdated. This should be free.

Redraw Fees

What It Is: Charge to access funds you've paid ahead.

Typical Cost: $0-$50 per redraw

What to Know:

• Increasingly rare
• Online redraws usually free
• Phone/branch redraws sometimes charged
• Check minimum redraw amounts too

Rate Lock Fees

What It Is: Fee to lock in a rate before settlement (common for new builds/off-the-plan).

Typical Cost: $500-$750 for 90 days, more for longer

What to Know:

• Only relevant if settlement is delayed
• May not be refundable if you don't proceed
• Some lenders don't offer rate lock
• Can be worthwhile in rising rate environment

Exit Fees: Getting Out Can Cost

Discharge Fees

What It Is: Fee to release the mortgage from your property title when you pay off or refinance.

Typical Cost: $150-$400

What to Know:

• Charged by almost all lenders
• Non-negotiable in most cases
• Required even if you've paid off the loan
• Government registration fee is separate

Break Costs (Fixed Rate)

What It Is: Penalty for exiting a fixed rate loan early.

Typical Cost: $0-$50,000+ (can be massive)

How It's Calculated: Based on the difference between your fixed rate and current wholesale rates, multiplied by remaining term and loan balance.

Example:

• Fixed at 6.50% with 2 years remaining
• Wholesale rates now 5.50% (1% lower)
• Loan balance: $400,000
• Approximate break cost: $400,000 × 1% × 2 = $8,000

What to Know:

• Can be tens of thousands of dollars
• Calculated at time of discharge
• No maximum cap
• Ask for estimate before committing

Early Exit Fees

What It Is: Penalty for paying off your loan within a certain period.

Typical Cost: Now prohibited on new loans (since 2011)

What to Know:

• Illegal on loans written after July 2011
• May still apply to older loans
• Different from break costs (which are allowed)
• Check if your loan predates the ban

Administrative Fees: The Sneaky Ones

Statement Fees

What It Is: Charge for receiving paper statements.

Typical Cost: $1-$5 per statement

How to Avoid:

• Switch to online statements
• Check your settings
• Easy to overlook

Variation Fees

What It Is: Charge for changes to your loan (e.g., switching from P&I to interest-only).

Typical Cost: $100-$300

What to Know:

• Charged for loan restructuring
• May apply for switching rate type
• Can sometimes be negotiated
• Factor into decisions about changes

Document Copy Fees

What It Is: Charge for copies of loan documents.

Typical Cost: $10-$50

How to Avoid:

• Keep your own copies
• Download from online banking
• Request at the time, not later

The True Cost Calculator

Let's add up a typical scenario:

Loan: $500,000 over 30 years

Upfront Costs:

• Application fee: $400
• Valuation fee: $300
• Settlement fee: $200
• Upfront total: $900

Ongoing Costs (30 years):

• Annual package fee: $395 × 30 = $11,850
• Monthly offset fee: $10 × 12 × 30 = $3,600
• Ongoing total: $15,450

Exit Costs:

• Discharge fee: $300
• Exit total: $300

TOTAL FEES: $16,650

And this doesn't include break costs if you're on fixed rate!

How to Negotiate Fees Away

Before You Sign

Research Leverage:

1. Get quotes from multiple lenders
2. Note which fees each charges
3. Use fee-free lenders as leverage
4. Ask directly: "Can you waive this fee?"

Effective Negotiation:

• "I've received an offer from [competitor] with no application fee. Can you match that?"
• "I'm a strong borrower with [good deposit/income]. I'd expect these fees to be waived."
• "I'm happy to proceed today if you can remove the [specific fee]."

On Existing Loans

Annual Package Fee:

• Call and ask for waiver or discount
• Mention you're considering refinancing
• Point out your payment history
• Sometimes waived for loyal customers

Ongoing Fees:

• Ask to switch to a different product
• Request fee-free alternatives
• Negotiate based on relationship value
• Consider refinancing if they won't budge

Fee Comparison: Big Banks vs. Non-Banks

Big Banks (CBA, Westpac, ANZ, NAB)

Typical Fee Profile:

• Package fee: $395/year
• Offset account: Included in package
• Discharge fee: $350
• Often have establishment fees

Advantages:

• Branch network
• Integrated banking
• Sometimes negotiable

Non-Bank Lenders

Typical Fee Profile:

• No package fee (or lower)
• Offset often free
• Lower establishment fees
• Competitive discharge fees

Advantages:

• Often lower total fees
• Competitive rates
• Less bureaucracy

Online-Only Lenders

Typical Fee Profile:

• Minimal or no fees
• No package deals
• Simple products
• Very competitive

Considerations:

• No branches for complex issues
• Phone/online service only
• May have fewer features

Fee Red Flags

Avoid Loans With:

• ❌ Extra repayment fees
• ❌ Redraw fees over $20
• ❌ Monthly fees AND annual fees
• ❌ Fees not clearly disclosed
• ❌ "Administrative" fees for basic tasks

Questions to Ask:

1. "What is every fee I will pay over the life of this loan?"
2. "Which fees are negotiable?"
3. "Are any fees being waived for me specifically?"
4. "What fees could I face if circumstances change?"

The Bottom Line

Fees matter more than most borrowers realize. Over a 30-year loan, even "small" annual fees compound into significant amounts. When comparing loans:

1. Look beyond the interest rate to total cost including fees
2. Calculate whether package fees are worth it for your loan size
3. Negotiate upfront fees before you sign
4. Understand break costs before choosing fixed
5. Review fees annually and negotiate or refinance if necessary

At Ding Financial, we analyze total loan cost—not just interest rates—to find the best value for your situation. Our detailed comparisons include all fees so you can make a truly informed decision.

Contact us for a comprehensive loan comparison that reveals the true cost of each option.