Fixed Rate Home Loan Fees: What Painters Need to Know

Why Fixed Rate Loans Appeal to Painters

As a painter, you know the value of certainty. When you quote a job, you factor in paint costs, labour, and materials to give clients a clear price. The same principle applies when choosing a fixed interest rate home loan. Locking in your home loan interest rate means knowing exactly what your repayments will be for a set period, typically between one and five years.

For tradies whose income can fluctuate with seasonal work or project availability, this certainty helps with budgeting and financial planning. However, while fixed rate home loans offer stability, they also come with specific fees and costs that you should understand before signing on the dotted line.

Upfront Fees When Applying for a Fixed Rate Home Loan

When you apply for a home loan, several upfront costs might come into play:

Application Fees: Some lenders charge an application or establishment fee when processing your home loan application. These fees typically range from $0 to $1,000, though many lenders have moved away from charging these fees to remain competitive.

Valuation Fees: Lenders need to know the property's worth before approving your loan amount. Valuation fees usually cost between $200 and $500, depending on the property's location and value.

Settlement Fees: These cover the administrative costs of finalising your home loan and transferring property ownership. Expect to pay between $150 and $400.

Lenders Mortgage Insurance (LMI): If your loan to value ratio (LVR) exceeds 80%, you'll likely need to pay LMI. This insurance protects the lender if you default on your loan. LMI can cost thousands of dollars, though some lenders offer special arrangements for tradies that might help reduce or waive this cost.

The Break Costs That Catch People Out

Here's where fixed rate loans differ significantly from variable rate options. If you need to exit your fixed interest rate home loan before the fixed period ends, you'll likely face break costs. These fees can be substantial and are calculated based on:

• How much time remains on your fixed term
• The difference between your fixed interest rate and current home loan rates
• Your remaining loan amount

Break costs can range from a few hundred dollars to tens of thousands, depending on these factors. You might trigger break costs if you:

• Refinance to another lender
• Sell your property
• Make additional repayments above the allowed limit
• Switch from a fixed rate to a variable interest rate

Ongoing Fees to Watch For

Beyond the upfront costs, fixed rate home loans may include ongoing fees:

Monthly Account Keeping Fees: Some lenders charge between $10 and $30 per month to maintain your loan account. Over the life of your loan, these add up.

Annual Package Fees: If you've chosen one of the premium home loan packages with additional home loan features, you might pay an annual fee of $300 to $400.

Offset Account Fees: While offset accounts are less common with fixed rate home loans, if your lender offers a linked offset or partial offset, there may be monthly fees attached.

Restricted Features Mean Hidden Costs

Fixed rate home loans typically offer fewer home loan features than variable rate options. These restrictions can create indirect costs:

Limited Additional Repayments: Most fixed rate loans cap extra repayments at $10,000 to $30,000 per year. If you land a big painting contract and want to pay down your loan faster, you'll face break costs for exceeding this limit. This restriction can slow your ability to build equity compared to a variable home loan.

No Redraw Facility: Many fixed rate products don't allow you to redraw extra payments you've made. This reduces your financial flexibility if you need access to those funds.

Portable Loan Limitations: If you want to move to a different property, transferring a fixed rate loan can be more complex and potentially costly compared to a variable rate or split loan arrangement.

Split Loans: Getting the Benefits of Both

Many painters find that a split loan arrangement offers the right balance. By splitting your home loan into both fixed and variable portions, you can:

• Enjoy certainty on part of your repayments through the fixed component
• Maintain flexibility on the variable portion for making extra repayments
• Reduce overall risk if interest rates move in either direction
• Access home loan features like an offset account on the variable portion

While split loans may involve fees for both loan components, they often provide a middle ground that suits tradies who want some stability without sacrificing all flexibility.

Comparing Home Loan Products as a Painter

When you compare rates and home loan options, don't just look at the advertised interest rate. Calculate the total cost by factoring in:

1. All upfront fees and charges
2. Ongoing monthly and annual fees
3. The likelihood you'll need to exit early (and potential break costs)
4. The value of home loan features you're giving up
5. Whether interest rate discounts are available for painters specifically

Some lenders offer rate discounts or fee waivers for tradies, which can significantly improve your borrowing capacity and reduce costs over time.

Questions to Ask Before Fixing Your Rate

Before committing to a fixed interest rate home loan, ask your mortgage broker:

• What's the total cost of establishing this loan?
• What are all the ongoing fees I'll pay?
• How much can I make in additional repayments without penalty?
• What happens if I need to sell or refinance during the fixed period?
• Are there any home loan benefits or home loan features I should know about?
• Can you show me how a split rate or variable rate option would compare?

If you're buying your first home or looking at investment property options, understanding these fees becomes even more important as you work to achieve home ownership and financial stability.

Making Fixed Rate Loans Work for Your Situation

Fixed rate loans can be valuable tools for painters who value certainty and want to secure their financial future. The key is understanding all associated fees and costs upfront, so you can make an informed decision that aligns with your circumstances.

Whether you choose a fixed rate, variable rate, or split loan depends on your individual situation, income patterns, and future plans. Having a clear picture of calculating home loan repayments and understanding your current home loan rates options helps you invest in property with confidence.

If you're ready to explore your home loan options and access home loan products from banks and lenders across Australia, speaking with a mortgage broker who understands the trades industry makes all the difference. They can help you compare different home loan packages and find one that fits your needs as a painter.

Call one of our team or book an appointment at a time that works for you. We'll walk you through the fees and costs associated with different home loan products and help you find an owner occupied home loan or investment option that supports your goals.