Variable Rate Investment Loan Fees & Costs to Know

Variable rate investment loans come with more than just interest.

You'll pay establishment fees upfront, ongoing account fees monthly or annually, and potentially discharge fees when you sell or refinance. Some lenders also charge valuation fees, settlement fees, and legal documentation fees. The total can sit anywhere between $600 and $2,500 in the first year alone, depending on the lender and whether you're borrowing through a packaged product.

Most plasterers looking at investment property finance focus on the interest rate first, which makes sense. But the fee structure can shift the actual cost more than a 0.10% rate difference. A lender offering a slightly lower rate but charging $395 annually in package fees, $10 monthly account-keeping fees, and $350 upfront might cost you more over three years than a loan with a marginally higher rate and no ongoing fees.

Application and Establishment Fees

Application fees cover the lender's cost to assess your loan, and establishment fees cover the setup and documentation.

Some lenders charge both separately, others bundle them into a single upfront cost, and some waive them entirely if you're borrowing above a certain threshold or refinancing an existing loan with them. In our experience, application fees range from $0 to $600, and establishment fees sit between $0 and $995. If you're buying an investment property and the lender quotes a combined upfront fee above $800, check what's included and whether it's negotiable. Many brokers can negotiate a waiver or reduction, particularly if you're borrowing a solid amount with a deposit above 20%.

Consider a plasterer buying a two-bedroom unit as a rental. The lender quotes a variable rate of 6.20% with a $600 establishment fee and no application fee. A second lender offers 6.15% but charges $400 application fee and $750 establishment fee. The rate difference saves roughly $250 annually on a $500,000 loan, but the upfront difference is $750. It takes three years just to recover the higher setup cost through the lower rate.

Ongoing Account and Package Fees

Account-keeping fees are charged monthly or annually to maintain the loan account.

Package fees are annual charges that bundle your investment loan with other products like offset accounts, credit cards, or transaction accounts, sometimes with a rate discount attached. Account-keeping fees typically range from $0 to $15 per month. Package fees sit between $200 and $395 per year. Not all lenders charge both, and some charge neither. If your lender is charging you $10 monthly plus $350 annually for a package, that's $470 per year in fees before you've paid a cent in interest. On a $400,000 investment loan at 6.30%, that $470 is the equivalent of adding 0.12% to your rate.

If the package gives you a 0.20% rate discount, you're ahead. If it only gives you an offset account you're not using and a credit card you don't need, you're paying for features that don't help. Check what's included and whether you'd use it before signing up.

Valuation and Settlement Fees

Valuation fees cover the cost of the lender's property valuer to confirm the property is worth what you're paying.

Settlement fees cover the lender's legal and administrative costs to finalise the loan at settlement. Valuation fees are usually between $200 and $400, depending on the property type and location. Settlement fees range from $0 to $500. Some lenders absorb the settlement fee as part of their service, while others pass it directly to you. Valuation fees are almost always passed on, though some lenders will cap or waive them if you're refinancing and they can use a desktop valuation instead of sending someone to the property.

If you're buying a unit in a regional area, expect the valuation to sit at the lower end. If you're buying a house in a metro area or a property on acreage, expect to pay closer to $400. These fees are usually deducted from the loan amount at settlement rather than paid upfront, so they don't hit your savings directly. But they do add to the total amount you're borrowing, which means you'll pay interest on them for the life of the loan unless you make extra repayments.

Discharge and Exit Fees

Discharge fees are charged when you pay out the loan in full, either because you've sold the property or refinanced to another lender.

Some lenders charge a flat discharge fee between $150 and $400. Others charge nothing. Exit fees used to be common but were largely banned on loans settled after mid-2011. If your investment loan was taken out before then and you're still on the original contract, check whether an exit fee applies. Most variable rate loans issued in recent years don't have exit fees, but discharge fees are still standard. If you're planning to refinance your investment loan within a few years to access equity or get a lower rate, factor the discharge fee into your cost comparison.

A plasterer refinancing a $450,000 investment loan to release equity for a second purchase might pay $350 to discharge the old loan and another $600 to establish the new one. That's $950 in fees just to switch lenders. If the new rate saves you $1,200 per year, you're ahead after the first year. If it only saves $400, it takes more than two years to recover the cost.

Lenders Mortgage Insurance on Investment Loans

Lenders Mortgage Insurance is charged when your deposit is below 20% of the property value.

It protects the lender if you default, and the cost is passed directly to you. On a variable rate investment loan, LMI can range from $2,500 to over $20,000 depending on your deposit size and loan amount. A 10% deposit will trigger LMI. A 15% deposit will also trigger it, though the cost is lower. At 20%, LMI drops to zero. The premium is usually capitalised into the loan amount, so you don't pay it upfront, but you will pay interest on it for the life of the loan unless you make extra repayments to reduce the balance.

If you're a plasterer with a solid income and you've been in business for a few years, some lenders offer LMI waivers for tradies at loan-to-value ratios up to 90%. You'll need to meet specific criteria around income, trading history, and credit profile, but if you qualify, it can save you several thousand dollars. If you don't qualify for a waiver and you're borrowing with a 10% deposit, compare the cost of LMI against waiting another six months to save a larger deposit. The difference between a 10% and 15% deposit can cut the LMI bill in half.

What You Can Negotiate or Avoid

Most upfront fees are negotiable if you're borrowing a decent amount or refinancing from another lender.

Establishment fees are often waived or reduced to $0 if you ask. Application fees can also be waived, particularly if you're using a broker who has volume arrangements with the lender. Ongoing package fees are harder to negotiate, but you can avoid them entirely by choosing a loan without a package structure. Valuation and settlement fees are usually non-negotiable, though some lenders will absorb the settlement fee as part of a refinance offer. Discharge fees are set by the lender and can't be negotiated, but you can check them before you commit to a loan and factor them into your decision if you plan to refinance or sell within a few years.

If a lender is quoting you $1,200 in upfront fees and $395 annually in package fees, ask your broker to request a waiver on the upfront and clarify what the package actually includes. If the package is delivering a 0.25% rate discount and an offset account you'll use, it's worth keeping. If it's delivering a rate discount of 0.05% and a credit card you don't want, drop the package and take the standard variable rate with no annual fee.

Call one of our team or book an appointment at a time that works for you. We'll walk through the full fee structure for your investment loan, not just the rate, and work out what you're actually paying over the first few years.

Frequently Asked Questions