Many people underestimate the cost of buying a home – lender and government fees can easily add 6-8% on to the cost of the property.
The best way to eliminate most of these costs is to be aware of the types of loan fees lenders charge and shop around for a loan that has as few of these as possible. It’s not possible to avoid loan fees completely, but you can definitely minimise them.
Application fee
Also called establishment fees, this is a fee that covers the cost of the documentation of the new mortgage. It can also be referred to as a start-up or set up fee. Application fees are a one-off fee that can be hefty – usually between $150-$700 depending on the lender and the loan amount. Application fees are the most commonly waived fee and are usually non-refundable.
Not all lenders charge application fees.
Extra repayment fees
While most mortgages these days allow borrowers to make extra repayments, some lenders charge a fee for those who do so. This generally applies to fixed rate loans and some variable rate products. If you’re in a position where you can make additional repayments on your investment loan, it’s important to ask the lender about extra repayment fees before applying for the loan.
Redraw fees
Redraw facilities are a widely used loan feature that allows you to access additional repayments paid into your loan. Some lenders may charge a fee for simply activating this facility before you’ve even accessed the redraw facility, while other lenders may limit the number of free redraws you can make. Once you’ve reached this quota, you may be charged a fee – typically between $10 and $50 for each extra redraw.
If you know that a redraw facility is a loan feature you will want to use, make sure you ask the lender if there are any fees that come with using a redraw facility.
Ongoing fees
You could also be subject to various ongoing fees, depending on your lender and product. These might include monthly service fees, annual fees, late payment fees, switching fees, portability fees, redraw fees and so on.
Some lenders might waive these fees as part of a promotion while others will charge you for interacting with your loan.
How can we help?
If you have any questions or would like further information or you are seeking property tax advice, please feel free to contact our office via email –info@investplusaccounting.com.au or phone 02 9299 7000 to either speak with someone or arrange a time for a meeting so we can discuss your requirements in more detail. You can arrange a free 15 minute no obligation chat to discuss your options. Please arrange an appointment with our office by clicking here
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
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