Variable rate home loans come with fees and costs that sit alongside your interest rate, and knowing what you'll actually pay matters when comparing loan products.
Application and Establishment Fees
Most lenders charge an upfront application fee to process your home loan, though some waive this entirely. Application fees typically range from zero to around $600, while establishment fees can add another $300 to $1,000 depending on the lender and loan amount. These charges cover the administrative work of setting up your loan, including property valuations and document preparation. Some lenders bundle these into a single upfront cost, while others itemise each component separately. When you apply for a home loan, ask whether these fees can be negotiated or waived, particularly if you have a strong financial position or are borrowing a larger amount.
Valuation and Settlement Fees
Your lender will arrange a property valuation to confirm the security is worth what you're borrowing against. Valuation fees generally sit between $200 and $400, though they can climb higher for regional properties or where additional desktop assessments are required. Settlement fees, sometimes called documentation fees, cover the legal process of registering the mortgage and typically add another $200 to $400. In some cases, lenders absorb these costs as part of a home loan package, but they're often passed directly to the borrower. If you're purchasing in a capital city, these fees are usually straightforward, but remote or unusual properties can attract higher charges.
Ongoing Account Keeping Fees
Some variable rate loans include a monthly account keeping fee, usually between $10 and $15 per month. Over the life of a loan, this adds up to several thousand dollars, so it's worth checking whether your loan includes this charge. Many lenders have phased out ongoing fees in favour of slightly higher interest rates, while others still apply them. If you're comparing home loan options with similar variable interest rates, the presence or absence of a monthly fee can shift the overall cost considerably. Account keeping fees are separate from any offset account fees, which some lenders charge for maintaining that facility.
Offset Account and Redraw Fees
A linked offset account can reduce the interest you pay on your variable home loan, but some lenders charge an annual fee to maintain the account. Offset fees typically range from $150 to $395 per year, depending on whether the offset is partial or full. Redraw fees apply when you withdraw additional repayments you've made on your loan. Some lenders offer unlimited redraws at no cost, while others charge $10 to $50 per transaction. If you plan to make extra repayments and access those funds later, choosing a loan with unlimited redraw can save you ongoing charges. In our experience, PAYG professionals often benefit from an offset account even with the annual fee, particularly when maintaining a buffer of savings.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Artisan Finance today.
Discharge and Early Repayment Fees
When you pay out your variable rate loan or refinance to another lender, a discharge fee applies to cover the cost of removing the mortgage from the property title. Discharge fees usually sit between $300 and $500. Unlike fixed rate loans, variable rate products generally don't include early repayment penalties, meaning you can pay off the loan ahead of schedule without break costs. This flexibility is one of the key advantages of choosing a variable interest rate over a fixed structure. If you're considering refinancing within a few years, a variable rate loan avoids the financial penalty that comes with breaking a fixed term early.
Package Fees for Additional Features
Some lenders bundle variable rate home loans into a package that includes discounted rates, fee waivers, and other benefits such as reduced credit card fees or waived offset account charges. Package fees typically range from $300 to $400 per year. Whether a package offers value depends on how many features you'll actually use. For example, if you maintain a high offset balance and hold multiple products with the same lender, the rate discount and fee waivers can outweigh the annual package cost. If you're only using the home loan itself, paying for a package may not deliver a meaningful benefit.
Lenders Mortgage Insurance (LMI)
If you're borrowing more than 80 per cent of the property value, your lender will require Lenders Mortgage Insurance. LMI protects the lender if you default on the loan, and the cost is passed to you as a one-off premium. The premium is calculated based on your loan amount and loan to value ratio, and can range from a few thousand dollars to tens of thousands for higher LVR loans. LMI can be paid upfront or capitalised into the loan amount. It's not a fee the lender charges directly, but it's a cost that applies to many first home buyers who are purchasing with a deposit below 20 per cent. LMI is a one-time charge and doesn't recur, but it's worth factoring into your upfront costs when calculating how much you need to borrow.
Rate Discount Periods and Honeymoon Fees
Some variable rate loans offer an introductory rate discount for the first year or two, then revert to a higher standard variable rate. While these products can appear attractive, check whether any exit fees apply if you refinance before the discount period ends. Some lenders include a clawback clause that requires you to repay waived fees or pay a penalty if you leave during the discount window. Understanding how long the discount lasts and what the revert rate will be helps you assess whether the product genuinely offers value over the medium term, particularly if you're comparing rates across multiple lenders.
Comparing Total Cost Across Lenders
When assessing variable rate home loan products, look beyond the advertised interest rate to the total cost over the first few years. A loan with a slightly higher rate but no ongoing fees can work out more affordable than a lower rate with monthly charges and high upfront costs. The comparison rate, which combines the interest rate and most standard fees, provides a useful starting point, but it assumes a fixed loan amount and term that may not match your situation. Working through the actual fees that apply to your loan amount and intended loan structure gives you a more accurate picture. Artisan Finance can help you compare the total cost across lenders, taking into account the features you'll use and the fees you'll actually pay.
If you're weighing up variable rate home loans and want to understand the full cost beyond the headline rate, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What upfront fees apply to a variable rate home loan?
Upfront fees typically include application fees (up to $600), establishment fees ($300 to $1,000), valuation fees ($200 to $400), and settlement fees ($200 to $400). Some lenders waive or bundle these charges, so it's worth asking whether they can be negotiated.
Do variable rate home loans charge monthly account keeping fees?
Some variable rate loans include a monthly account keeping fee, usually between $10 and $15. Many lenders have phased out these fees, so comparing the ongoing charges across lenders can save you several thousand dollars over the life of the loan.
What is a discharge fee and when does it apply?
A discharge fee covers the cost of removing the mortgage from the property title when you pay out the loan or refinance. It typically ranges from $300 to $500 and applies at the end of the loan term or when you switch lenders.
Are there fees for using an offset account or redraw facility?
Some lenders charge an annual offset account fee, typically between $150 and $395, while others include it at no cost. Redraw fees vary from zero to $50 per transaction, depending on the lender and loan product.
When does Lenders Mortgage Insurance apply?
LMI applies when you borrow more than 80 per cent of the property value. The premium is calculated based on your loan amount and LVR, and can be paid upfront or added to the loan amount. It's a one-time charge that protects the lender if you default.
