When comparing home loans, most borrowers focus on the interest rate — but fees can add thousands of dollars to the true cost. An application fee of $600, an annual package fee of $395, a valuation fee of $300, and a discharge fee of $350 might seem minor individually — but over 30 years, ongoing fees alone can exceed $12,000. Understanding every fee helps you compare the true cost of different loan products and avoid nasty surprises. This guide itemises every fee you may encounter on an Australian home loan.
What Fees Do You Pay When Taking Out a Home Loan?
Application fee (also called establishment fee or setup fee): A one-off fee charged when your loan is approved and established. Ranges from $0 to $900 depending on the lender. Many lenders now waive this fee as a promotional offer — always negotiate.
Valuation fee: Covers the cost of the property valuation commissioned by the lender. Ranges from $0 to $600 for a standard residential property. Some lenders absorb this cost; others pass it directly to the borrower. Higher-value or unusual properties may attract higher valuation fees.
Settlement fee: Some lenders charge a fee for processing the settlement (the legal transfer of the property and disbursement of funds). Ranges from $0 to $400. Increasingly uncommon — most lenders include settlement in the application fee or waive it.
Legal document preparation fee: The cost of preparing loan documents (mortgage, loan contract, disclosure statements). Usually $0–$300. Often bundled with the application fee.
Lenders Mortgage Insurance (LMI): Not technically a lender fee, but a significant upfront cost if your LVR exceeds 80%. LMI is a one-off premium paid at settlement, ranging from $2,000 to $40,000+ depending on the loan amount and LVR. It can be paid upfront or capitalised (added to the loan). LMI protects the lender — not you — against loss if you default and the property is sold for less than the outstanding balance.
Title search and registration fees: Government charges for searching the property title and registering the mortgage. Typically $200–$500 depending on the state. Paid through your conveyancer.
Conveyancing/solicitor fees: Not a lender fee, but an essential purchase cost. The solicitor or conveyancer who handles the legal aspects of the purchase charges $800–$2,500 depending on complexity and location.
Negotiate Application and Valuation Fees
Application fees and valuation fees are negotiable — especially if your broker is bringing the lender regular business. Many lenders will waive or reduce these fees for borrowers with strong applications (good income, low LVR, clean credit). Always ask your broker to negotiate fee waivers before accepting a loan offer.
| Fee Type | Typical Range | When Paid | Negotiable? |
|---|---|---|---|
| Application/Establishment | $0–$900 | At approval | Yes — often waived |
| Valuation | $0–$600 | At application or approval | Sometimes waived |
| Settlement | $0–$400 | At settlement | Sometimes waived |
| LMI (if LVR > 80%) | $2,000–$40,000+ | At settlement | No — but can be capitalised |
| Title search & registration | $200–$500 | At settlement | No — government charge |
| Conveyancing | $800–$2,500 | At settlement | Shop around for quotes |
What Ongoing Fees Will You Pay During Your Loan?
Annual or monthly package fee: If you have a 'package' home loan (which bundles a home loan with an offset account, credit card, and other products at a discounted rate), there is typically an annual fee of $295–$395. Over a 30-year loan, this totals $8,850–$11,850. Whether the package is worth it depends on the rate discount — a 0.10% rate discount on a $500,000 loan saves $500/year, which more than covers a $395 annual fee.
Monthly account-keeping fee: Some basic (non-package) loans charge a monthly fee of $8–$15 for account administration. This is becoming less common — many lenders now offer fee-free basic products.
Offset account fee: The offset transaction account linked to your loan may have a monthly fee of $0–$10. Some package loans include the offset at no additional cost; standalone offset accounts may charge separately.
Redraw fee: Some lenders charge a fee ($0–$50) each time you redraw additional repayments from your loan. Online redraws are usually free; manual (over-the-phone) redraws may attract a fee.
Rate lock fee: If you are taking a fixed rate loan and want to lock in the rate before settlement (to protect against rate increases), some lenders charge a rate lock fee of $500–$750 for a 90-day lock. If rates rise during the lock period, you pay the lower locked rate. If rates fall, most lenders allow you to take the lower rate — but check the specific terms.
Note: Under reforms introduced over the past decade, Australian lenders can no longer charge exit fees on home loans established after 1 July 2011. However, discharge fees and break costs (different from exit fees) still apply.
- ✓Annual package fee: $295–$395 (if applicable)
- ✓Monthly account-keeping fee: $0–$15
- ✓Offset account fee: $0–$10/month
- ✓Redraw fee: $0–$50 per transaction
- ✓Rate lock fee: $500–$750 (fixed rate loans only)
- ✓Statement and document request fees: $0–$20
- ✓Loan variation fee (changing loan terms): $0–$300
What Does It Cost to Leave or Switch Your Home Loan?
Discharge fee (also called mortgage release fee): When you pay off your home loan or refinance to another lender, the existing lender charges a fee to release (discharge) the mortgage from the property title. This fee ranges from $150 to $400 and is charged by virtually all lenders. It is not negotiable — it covers the administrative and legal process of removing the mortgage registration.
Break costs (fixed rate loans only): If you are on a fixed rate and you pay off the loan, refinance, or make extra repayments beyond the allowed limit before the fixed period ends, the lender can charge break costs. Break costs compensate the lender for the interest rate differential between your fixed rate and the current wholesale rate. In a falling rate environment, break costs can be substantial — potentially $10,000–$50,000+ depending on the loan size, rate difference, and remaining fixed term.
Break cost formula: The general formula is: Loan Balance × Rate Difference × Remaining Fixed Term. For example, $500,000 loan × 1.5% rate difference × 2 years remaining = $15,000. The actual calculation varies by lender and uses wholesale rates — not advertised rates — making it impossible to calculate precisely in advance.
Early repayment fee (loans before July 2011): Home loans established before 1 July 2011 may have early repayment or deferred establishment fees. These are being phased out as older loans are refinanced, but if you have a pre-2011 loan, check your contract.
Switching fee (internal product change): If you want to switch from variable to fixed (or vice versa) with the same lender, a switching fee of $0–$300 may apply. Some lenders allow unlimited free switching; others charge per switch.
The comparison rate is designed to help borrowers compare the true cost of loans including fees. By law, all lenders must advertise a comparison rate alongside the advertised rate — the comparison rate includes fees, charges, and the interest rate, expressed as a single percentage. However, comparison rates are calculated on a $150,000 loan over 25 years — which may not reflect your actual loan size and term. Use it as a guide, not an absolute.
Break Costs on Fixed Rate Loans Can Be Enormous
If interest rates have fallen since you locked in your fixed rate, break costs can be very large. Before breaking a fixed rate loan, always ask your lender for a written break cost estimate. If the break cost exceeds the savings from refinancing, it may be better to wait until the fixed period ends. Your broker can calculate whether refinancing is worthwhile after accounting for break costs.
Frequently Asked Questions
About the Author
Sakib Manzoor
Senior Finance Wellness Expert
Sakib Manzoor is the founder of Secure Finance and brings extensive experience in Australian mortgage broking and financial wellness. Specialising in helping clients achieve their property finance goals through personalised strategies and expert guidance, Sakib is FBAA accredited and committed to providing clear, actionable advice. All content is written to meet Australian regulatory standards and is regularly updated to reflect current market conditions.