It is crucial for anyone seeking a home loan to consider not only low-interest rates and advantageous features but also lower fees and charges. These additional costs, although seemingly insignificant at first, can accumulate considerably. Some lenders may offer attractive interest rates but offset the savings by imposing additional fees. Others may include hidden costs that are not immediately apparent.
Upfront Fees Explained
When you first take out a home loan, the lender may charge various upfront fees. These are one-off fees but can take a bite out of your home-buying budget. Upfront fees can include application/loan establishment, valuation, legal, and settlement fees. To prevent any surprises on your bill, we’ve compiled a comprehensive list of all the upfront fees associated with obtaining a home loan:
Application Fees
These are fees that cover the cost of documenting your new mortgage. They are also called establishment fees and are a one-off payment that can cost between $200 – $700, depending on the loan. Some lenders waive establishment fees on specific products or during special promotions.
Valuation Fees
This fee covers the cost of performing a valuation of the property you’re purchasing. The valuation helps the lender ensure the amount you’re borrowing and the size of your deposit are appropriate. The cost can range from $100 to $300, but some lenders offer a free valuation.
Government Charges
The government charges these fees to cover stamp duty on the mortgage. Stamp duty costs can differ depending on whether or not you’re a first-home buyer, what state you’re in, and the cost of the property. You can use our stamp duty calculator to find out more.
Conveyancing Fees
The loan settlement process entails the transfer of a property’s title from the seller to the buyer. This process is known as conveyancing and is usually handled by an accredited professional. Conveyancing fees typically run between $700 and $2,500.
Legal Fees
The loan application process includes a contract that has to be handled by a legal team. This fee covers those legal services and the preparation of legal documents for the home loan. The cost can vary depending on the lender but can be over $100.
Other Fees
Some fees are charged by third parties such as solicitors, mortgage insurers, or state or territory governments. While you may be able to avoid upfront fees from lenders, it can be harder to avoid fees charged by other parties in the mortgage process.
Note: Different state and territory governments are responsible for various costs, including stamp duty and transfer fees. Additionally, local councils are tasked with calculating rates, which vary in cost. Banks and lenders also charge different amounts for their services.
Additional Upfront Fees
Stamp Duty
This is a state government tax on property purchases, and the cost varies depending on the state, property value, and whether you’re a first-home buyer eligible for a concession.
Lenders Mortgage Insurance
If your deposit is less than 20%, you may need to pay lenders mortgage insurance to protect the lender if you default. This can cost thousands of dollars and is a one-off payment.
Mortgage Registration Fees
This is a state government fee to register the mortgage on the property title. The cost can vary from $145 to $187.
Buyers must be aware of a range of additional costs, which are not always explicitly stated in attractive real estate advertisements and may appear to be concealed.
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