Variable Rate Loans: Fees and Costs to Know

Variable rate loans come with fees that add hundreds or thousands to your borrowing costs.

If you're weighing up loan options, the advertised rate tells you less than half the story. Application fees, ongoing account fees, offset account charges, and exit costs all stack up differently depending on which lender you choose. Some lenders waive upfront fees but clip you monthly. Others charge you $600 at settlement and then leave you alone. Knowing which fees matter and which ones you can dodge makes a real difference to what you pay over the life of your loan.

Application and Establishment Fees

Most lenders charge between $0 and $600 to process your application and set up the loan. This fee covers credit checks, property valuations, and the administrative work involved in getting your loan approved and settled. Some lenders advertise no application fee but recover the cost through slightly higher ongoing fees or a less competitive rate. Consider a builder refinancing a $450,000 owner-occupied loan who compares two lenders: one charges $600 upfront with no monthly fee, the other charges nothing at application but $15 per month for the life of the loan. Over five years, the second option costs $900, so the upfront fee is actually cheaper. The calculation shifts if you plan to refinance within a year or two, in which case paying nothing upfront makes more sense.

Ongoing Monthly Account Fees

Some variable loans charge a monthly account fee, typically between $10 and $20. Over a 30-year loan, a $15 monthly fee adds up to $5,400. Not every lender charges this, and it's one of the negotiable fees worth pushing back on when you're comparing loan packages. If you're self-employed or working through a company structure, some lenders waive monthly fees entirely if you meet certain borrowing thresholds or take out a professional package. In our experience, builders who borrow above $400,000 can often access fee-waived packages without much fuss.

Offset Account Fees and Linked Accounts

An offset account can save you thousands in interest, but some lenders charge $10 to $20 per month for the privilege. A linked offset on a variable loan reduces the balance on which you're charged interest, so if you're holding cash from progress payments or retention releases, it's worth having. The fee question comes down to whether you'll keep enough in the offset to justify the cost. If you're holding $20,000 in an offset and your rate is 6%, you save around $1,200 in interest annually. A $15 monthly fee costs $180 a year, so you're still ahead by over $1,000. But if your offset balance is usually below $5,000, the fee eats most of the benefit. Some lenders offer fee-free offsets on variable loans, particularly through broker-negotiated packages, so it's worth asking before you commit.

Valuation Fees and Lenders Mortgage Insurance

Most lenders will charge you for the property valuation, which ranges from $200 to $400 depending on property type and location. Some lenders absorb this cost as part of a promotion or fee waiver, but don't assume it's included unless it's spelled out in writing. If you're borrowing above 80% of the property value, you'll also pay Lenders Mortgage Insurance. LMI isn't a loan fee in the traditional sense, but it's a cost you need to factor in. On a $500,000 loan with a 10% deposit, LMI can run anywhere from $8,000 to $15,000 depending on your lender and loan structure. Some lenders offer LMI waivers for tradies in certain occupations, including builders, which can save you a considerable amount if you're borrowing with less than 20% deposit.

Discharge and Exit Fees

When you pay off your loan or refinance to another lender, most lenders charge a discharge fee, typically between $150 and $400. This covers the administrative cost of releasing the mortgage and providing a discharge of mortgage document to the titles office. It's not a huge amount, but it's one more cost to account for when you're calculating whether refinancing will actually save you money. Some lenders also charge an exit fee on top of the discharge fee, though this has become less common. Always check the loan documentation for both before you sign, particularly if you think you might refinance within a few years to take advantage of a lower rate.

Comparison Rate and Why It Matters

The comparison rate is a single figure that combines the interest rate and most standard fees into one percentage, giving you a clearer picture of the true cost of the loan. It's calculated on a $150,000 loan over 25 years, so it won't match your exact situation, but it's useful for comparing loans side by side. A loan advertising a 5.99% variable rate might have a comparison rate of 6.15% once fees are factored in. Another lender might offer 6.09% with a comparison rate of 6.10% because they charge fewer fees. The second loan costs you less overall, even though the headline rate is higher. Don't ignore the comparison rate when you're weighing up options, particularly if you're applying for a home loan with a smaller deposit or shorter timeframe.

Package Fees and Annual Fees

Some lenders bundle their variable loans into a package that includes fee waivers, rate discounts, and perks like transaction account rebates or credit card fee waivers. These packages usually charge an annual fee, anywhere from $300 to $400. Whether it's worth it depends on how much you save. If the package waives your monthly account fee, offset fee, and gives you a 0.10% rate discount, the savings can easily exceed the annual cost. As an example, a builder with a $500,000 loan gets a 0.10% discount, saving $500 a year in interest, plus $180 in offset fees and $180 in monthly account fees. That's $860 in savings against a $395 annual package fee, so you're $465 ahead. But if you don't use the offset or the package benefits, you're paying for nothing.

Rate Discount Negotiations and Ongoing Costs

Variable loans give you more room to negotiate than fixed loans. Lenders adjust their advertised rates based on your deposit size, loan amount, and whether you're owner-occupied or investing. A builder borrowing $600,000 with a 20% deposit should be asking for at least a 0.20% to 0.30% discount off the advertised variable rate. That's $1,200 to $1,800 a year on a $600,000 loan, which adds up quickly. Brokers can usually secure deeper discounts than you'll get walking into a branch, particularly if you're self-employed or have a solid deposit and clean credit history. Don't assume the rate you're quoted is the rate you have to accept.

If you're ready to work out what you'll actually pay on a variable loan, call one of our team or book an appointment at a time that works for you. We'll break down the fees, compare the real cost across lenders, and make sure you're not paying for features you won't use.

Frequently Asked Questions