When taking out a mortgage, be wary of upfront or ongoing home loan fees you have to pay

Buying a home is an exciting milestone, but there are a lot of associated costs to consider apart from interest rates. One of the most important is the home loan fees needed for a mortgage. But don’t fret, as we’re here to clear things out. Below is a quick yet comprehensive guide to home loan fees and how they may affect your overall budget.

What Are Home Loan Fees?

Home loan fees are additional costs charged to borrowers when obtaining a mortgage loan. They are separate from the interest rates on home loans and can be considered a “hidden” cost of borrowing. Often, homebuyers don’t even realise they have to pay these upfront fees until they come around, as these charges are typically buried deep within the contract’s terms and conditions. Plus, mortgage fees can vary greatly depending on the lender and the type of home loan you’ve taken out.

What Types of Home Loan Fees Are There?

There are many upfront fees and ongoing fees you can expect that are associated with home loans, and here are some of them:


1. Establishment Fees

Establishment fees are charged by lenders for the cost of setting up a home loan. These upfront home loan fees generally cover the lender’s processing, administration and legal costs and usually range from no charge to up to $1,000. Keep in mind that these are one-off payments and are sometimes called setup or application fees. Also, it pays to ask whether these application fees can be waived, as some lenders may do so for special promotions.


2. Valuation Fees

Valuation fees are another upfront fees you may need to pay when taking out a home loan in Australia. This fee covers the costs associated with having your property valued to ensure that it meets the lender’s criteria. The amount of valuation fee can range from $150 to $500. It also depends on the type of property, declared property value and location. For instance, a multi-million dollar rural home may incur a higher valuation fee than a typical house in the city.  


3. Legal Costs

Legal fees or conveyancing fees are another expense you may need to consider when getting a home loan. This fee covers the costs associated with having your home loan and other legal documents reviewed and prepared for signing. The amount of this fee can range from $200 to $1,000. Conveyancing fees can also vary depending on whether you pay a fixed payment or a sliding fee based on the property’s price. 


4. Ongoing Fees

When securing a home loan in Australia, you may be charged ongoing fees to cover the running and maintenance of your loan. The ongoing fees could range from no cost to up to $1,000, depending on the lender and the type of home loan. These can also include monthly service fees, annual fees, account-keeping fees & exit fees. So apart from upfront fees, you must consider the possible ongoing fees when calculating a home loan amount.


5. Agent Fees

When applying for a home loan, you may need to pay a mortgage broker for their services. It is probably one of the most-known upfront home loan fees. Still, you have to remember that it can range from zero cost to up to 3% of the loan amount. This fee covers the agent’s time and expertise in helping you to secure the best loan for your needs and making the entire home loan process as convenient as possible. 


6. Fixed Rate Break Costs

If you break a fixed-rate loan before the end of the agreed fixed term, you are likely to pay a fee. This fee is known as a fixed rate break cost and can range from no cost to up to 2% of the loan amount. This fee covers the lender’s costs of breaking the fixed-rate loan. Keep that in mind when comparing fixed-rate home loans or calculating your possible home loan repayments.

Summing It Up

Whether you plan to take out a fixed-rate home loan or mortgage with a variable interest rate, there are several potential fees and charges that you may need to pay. These can include application fees, legal fees, agent fees, fixed rate break costs and other upfront or ongoing fees. That’s not to mention the expenses associated with stamp duty, mortgage registration fees, lenders’ mortgage insurance, etc. 


Simply put, getting a home loan isn’t only about finding the lowest interest rates or thinking about whether you can afford the principal and interest repayments. It also pays to understand all those mentioned fees and charges before signing up for a loan. That way, you can compare home loans effectively and make an informed decision.

Contact Us Today

And if you need more guidance, the best mortgage lenders in our team in Wealthy You are ready to help. Wealthy You is an Australian Mortgage Company offering various mortgage solutions that will help meet your financial situation and needs. If you are looking for the best home loans in Sydney, check out what we have to offer!