Home Loan Fees Explained

The number of home loan fees you may get asked to pay is a long list. We explain them for you.

• Additional repayments fee: Some loans charge a fee if you make a lump sum payment. When charged, it is usually a set fee. On fixed interest rate loans, additional repayments are generally considered a privilege and the fee can be significant, for example $75 per payment.
• Break cost: Break costs are usually charged when a borrower exits a fixed interest rate loan before the end of the fixed period. Different lenders calculate break costs in different ways. The calculation is usually based on the movement in interest rates from when the fixed loan was entered, to when it is exited, and the balance of the loan. If interest rates have fallen, the amount payable can be large.
• Combination loan fee: Most lenders now allow borrowers to take out a combination loan, for example borrowing $100,000 and having $50,000 as a variable loan and $50,000 as a fixed loan. The combination loan fee is the additional amount you will pay to take out a combination loan. Many lenders do not charge to have a combination loan; others charge up to $600.
• Direct debit fee: If your loan is not with the same institution you do your banking with and you have them automatically transfer your loan payment to your lender when it is due, they may charge a direct debit fee. Direct debit fees can be significant, e.g. $3.50 per direct debit, which would add over $14 a month to the cost of your home loan if you made weekly payments.
• Free transactions: Not exactly a fee, but relevant none the less. A number of loans allow the borrower to use their home loan as a transaction account or to have an offset account. These often allow a number of free transactions per month, which can reduce the borrower’s overall cost of banking.
• giroPost fee: A growing number of institutions allow their customers to conduct transactions at Australia Post Offices using the giroPost system. A fee will accompany withdrawals made using this system.
• Internet transaction fee: The fee for making a transfer using the lender’s internet banking system.
• Late payment fee: When you fall behind with your loan payments, you may be penalised. This can be in the form of a higher interest rate on the outstanding amount or a flat fee after the payment is overdue for a set period.
• Mortgage discharge fee: The fee the lender charges to transfer ownership of the property to the borrower when the loan has been repaid. It covers the lender’s legal and administrative costs. Generally, the government transfer fees must be paid, in addition to the quoted amount. These vary from state to state.
• Ongoing fee: Basically, a fee for having a home loan. It is usually charged at regular intervals, often monthly.
• Over-the-counter fee: The fee for making a withdrawal over the counter at your bank. Over-the-counter transactions are usually more expensive than using other electronic means, such as ATMs, telephone banking, the internet or EFTPOS.
• Portability fee: The fee to change your loan over to a new property if you move. Some loans are not portable. Where a fee is charged, it is usually in the range of $150 to $300. This is usually significantly less than the cost of closing the old loan and establishing a new one. However, there can be a number of restrictions on the timing of changing the properties over.
• Redraw fee: The fee for making a redraw. A number of loans have a number of free redraws per year, following which a fee is charged.
• Refix fee: The fee to have another fixed period at the end of a fixed interest rate term.
• Switch to fixed fee: The fee to switch from a variable interest rate to a fixed interest rate.

To discuss this article or anything to do with your finances, please call our office today and we will be happy to assist you.

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