How to Avoid Variable Rate Loan Fees as a First Home Buyer

Variable Rate Loans Come with Fees You Need to Account for Before You Sign

Variable rate loans are not just about the interest rate. Application fees, valuation fees, settlement fees, and ongoing account-keeping charges all add to the total cost of your loan. For carpenters looking to buy your first home, understanding these charges upfront means you can budget correctly and avoid shortfalls at settlement. The deposit is only part of what you need in the bank.

Application Fees Range from Zero to Over $1,000

Lenders charge an application fee to process your loan, and the amount varies widely. Some lenders charge nothing. Others charge $600 to $800, and a small number charge over $1,000. This fee is typically payable at the time of settlement, though some lenders deduct it from the loan amount, which means you pay interest on it for the life of the loan. If you are applying with a 5% deposit through the Australian Government 5% Deposit Scheme, keeping your upfront cash costs low matters. Ask your broker which lenders waive this fee.

Valuation Fees Are Not Optional

Every lender will require a valuation before approving your loan. The lender arranges the valuation, and you pay for it. Fees typically run between $250 and $400 depending on the property and location. You pay this whether the loan is approved or not. If you are buying an established home in a regional area or a property that is difficult to value, the fee may be higher. This is a separate cost from building and pest inspections, which you arrange and pay for independently.

Settlement Fees and Legal Costs Add Another Layer

Your lender will charge a settlement fee, which is separate from the application fee. This usually sits between $200 and $350 and covers the cost of preparing and registering the mortgage documents. You will also need a conveyancer or solicitor to handle the legal side of the purchase. Their fees vary depending on the state and the complexity of the transaction, but you should budget at least $1,200 to $1,800 for conveyancing. In Western Australia, where the First Home Owner Rate of duty now applies statewide with a single threshold, your conveyancer will confirm your eligibility and arrange the concession with RevenueWA. This work is part of their fee.

Lenders Mortgage Insurance Is the Biggest Upfront Cost for Most First Home Buyers

Lenders Mortgage Insurance is charged when your deposit is less than 20% of the purchase price. LMI protects the lender, not you, but you pay the premium. The cost depends on the size of your deposit and the loan amount, but it can run into the thousands. A 10% deposit on a property will attract a lower LMI premium than a 5% deposit. If you are eligible for the Australian Government 5% Deposit Scheme, no LMI is payable because Housing Australia guarantees the shortfall between your deposit and 20% of the property value. This makes a material difference to the cash you need upfront. Some lenders offer LMI waivers or discounts for specific occupations, including some trades. Check whether you qualify before submitting your application.

Ongoing Fees Are Charged Monthly or Annually

Variable rate loans can carry ongoing account-keeping fees or monthly service fees. Some lenders charge $10 to $15 per month. Others charge nothing. Over the life of a 30-year loan, even a small monthly fee adds up. If you are paying $10 per month, that is $3,600 over the life of the loan. Some lenders waive the fee if you meet certain conditions, such as maintaining a minimum loan balance or linking a transaction account. Read the fee schedule in the loan documents before you commit.

Offset Accounts and Redraw Facilities May Have Different Fee Structures

An offset account is a transaction account linked to your home loan. The balance in the offset account reduces the amount of interest you pay on the loan without locking your money away. Some lenders offer offset accounts with no additional fees. Others charge a monthly fee or require you to take a packaged loan product with an annual package fee. Redraw facilities allow you to access extra repayments you have made on the loan, but some lenders charge a fee each time you make a withdrawal. If you are self-employed as a carpenter and need flexibility to access funds during quieter months, an offset account with no withdrawal fees gives you more control than a redraw facility with per-transaction charges.

Consider a carpenter who has saved a 10% deposit and plans to keep cash in an offset account as a buffer for irregular income. If the lender charges $15 per month for the offset account, that is $180 per year. A lender with no offset fee and the same variable rate saves that $180 annually, which can go toward extra repayments instead. The offset balance also reduces the interest you pay, so the larger the balance you keep in the account, the more you save. Over the first five years, even a modest offset balance can save thousands in interest.

Discharge Fees Apply When You Pay Out or Refinance the Loan

When you sell the property or refinance to another lender, your current lender will charge a discharge fee to remove the mortgage from the title. This fee is usually between $300 and $500. You do not pay it upfront, but it is part of the total cost of the loan. If you refinance within a few years to take advantage of a lower interest rate or a product with different features, the discharge fee is a cost to factor into the decision. Some lenders also charge a fee to vary the loan, such as switching from variable to fixed or adding a borrower to the title. Check the full fee schedule before signing.

Government Grants and Concessions Do Not Cover Loan Fees

First home buyer grants and stamp duty concessions reduce the upfront cost of purchasing, but they do not cover loan fees, valuation costs, or conveyancing. In Western Australia, eligible first home buyers purchasing or building a new home valued under the relevant cap can access the $10,000 First Home Owner Grant. The grant is paid at settlement and can be used toward deposit or costs, but it does not replace the need to budget for lender fees. Similarly, the First Home Owner Rate of duty reduces or eliminates transfer duty, but settlement fees, legal costs, and LMI are separate.

If you are purchasing an established home in Western Australia with a dutiable value of $600,000 or less, you will pay no transfer duty. A home valued between $600,001 and $800,000 attracts a concessional rate. These concessions apply regardless of whether the property is in Perth, the Peel region, or elsewhere in the state. The single statewide threshold has been in place since May, and it applies to all eligible transactions from that date. Your conveyancer will calculate the duty payable and confirm your eligibility.

Read the Comparison Rate but Understand What It Excludes

The comparison rate is a tool to compare the total cost of different loan products. It combines the interest rate and most fees into a single percentage figure. It includes ongoing fees and some upfront costs, but it excludes LMI, application fees charged as a dollar amount rather than a percentage, and any government charges. Two loans with the same advertised interest rate can have very different comparison rates if one has higher ongoing fees or charges an annual package fee. The comparison rate is calculated on a $150,000 loan over 25 years, so if your loan amount is different, the comparison rate will not reflect your actual cost. Use it as a guide, not a final figure.

Variable rate loans give you the flexibility to make extra repayments without penalty, and the interest rate can move down as well as up. But flexibility does not mean fee-free. Every fee you pay reduces the amount of equity you build in the property, so choosing a lender with low or no ongoing fees makes a difference over time. If you are weighing up whether to pay a higher application fee in exchange for a lower interest rate, calculate the break-even point. A $1,000 application fee might be worth paying if the interest rate is 0.20% lower and you plan to hold the loan for more than a few years.

Call one of our team or book an appointment at a time that works for you. We will run through the fee structures across different lenders and show you where you can cut costs without sacrificing the features you need.

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