What are Variable Rate Home Loan Fees and Costs?

What Fees Apply to Variable Rate Home Loans?

Variable rate home loans come with a range of fees, some charged once and others recurring throughout the loan term. Application fees, valuation fees, settlement fees, and annual account-keeping fees are the most common charges you'll encounter.

The cost structure varies between lenders. Some lenders advertise low or no upfront fees but recover costs through higher ongoing charges or less competitive interest rates. Others bundle fees into packages that include features like an offset account or redraw facility. Understanding which fees apply to your situation helps you assess the true cost of a loan beyond the advertised rate.

Consider a tutor applying for a loan to purchase a unit. The lender charges a $600 application fee, a $250 valuation fee, and a $200 settlement fee. That's $1,050 in upfront costs before the first repayment is made. If the same lender also charges a $395 annual fee, the total cost over the first year reaches $1,445. Another lender might waive the application fee and charge no annual fee, but offer a variable rate 0.15% higher. Over a $500,000 loan, that rate difference costs roughly $750 per year, making the second option more expensive over time despite the lower upfront fees.

Application and Settlement Fees

Application fees cover the lender's cost of processing your loan. Settlement fees cover the legal and administrative work involved in finalising the loan and transferring funds.

Most lenders charge between $300 and $600 for application fees, though some charge nothing. Settlement fees typically range from $150 to $300. These fees are usually paid upfront or deducted from the loan amount at settlement. If you're comparing home loan options, check whether the lender allows you to capitalise these costs into the loan amount or requires payment before settlement.

Some lenders waive application fees during promotional periods or for specific professions, including tutors working in education-related roles. If you're applying for a home loan as a tutor, ask whether any fee waivers apply to your circumstances.

Valuation Fees

Lenders require a valuation to confirm the property's worth before approving a loan. The valuation fee covers the cost of an independent assessment and typically ranges from $200 to $400, depending on the property type and location.

You'll usually pay this fee upfront, even if the loan application doesn't proceed. Some lenders waive valuation fees for certain loan amounts or property types, while others roll the cost into the loan. If you're refinancing or applying for pre-approval, ask whether the lender will accept a recent valuation to avoid paying twice.

Ongoing Account Fees

Annual account-keeping fees, also called loan service fees, cover the lender's cost of maintaining your loan account. These fees range from $0 to $395 per year, depending on the lender and loan package.

Some lenders charge monthly fees instead of annual fees, which can add up to the same amount over the year. Others waive ongoing fees if you hold other products with the same institution, such as a transaction account or credit card. If you're comparing variable home loan rates, factor in the annual fee when calculating the total cost of the loan. A loan with a slightly higher interest rate but no annual fee may cost less overall than a loan with a lower rate and a $395 yearly charge.

Offset Account and Package Fees

An offset account linked to your home loan can reduce the interest you pay, but some lenders charge a fee for this feature. Offset account fees typically range from $10 to $20 per month, or around $120 to $240 per year.

Loan packages that bundle an offset account with other features, such as fee-free transaction accounts or discounted credit cards, often come with a combined annual fee. These package fees usually sit between $300 and $400 per year. Whether a package makes sense depends on how much you'll use the offset account and other features. In our experience, tutors with irregular income streams benefit from offset accounts because they can deposit larger amounts during busy periods and reduce interest without committing to higher repayments.

Discharge and Exit Fees

Discharge fees apply when you pay off your loan or switch to another lender. This fee covers the administrative cost of removing the lender's interest from the property title and typically ranges from $150 to $400.

Some lenders also charge exit fees, though these are less common on variable rate loans than they used to be. If you're planning to refinance within a few years, check whether the lender charges a discharge fee and factor that into your comparison. The cost of switching lenders can add up quickly when you include discharge fees, application fees with the new lender, and potential valuation fees.

Redraw Fees and Transaction Limits

Many variable rate home loans allow you to make extra repayments and redraw those funds later if needed. Some lenders charge a fee each time you redraw, usually between $10 and $50 per transaction. Others limit the number of free redraws per year or charge fees for online redraws but not branch or phone redraws.

If you're likely to make extra repayments and access those funds regularly, look for a loan with unlimited free redraws or consider using an offset account instead. The flexibility is similar, but the cost structure differs. Offset accounts typically charge a monthly or annual fee rather than a per-transaction charge, which suits borrowers who access funds frequently.

Late Payment and Dishonour Fees

Lenders charge late payment fees if your repayment doesn't arrive on the due date. These fees range from $10 to $50 per occurrence. Dishonour fees apply if a scheduled direct debit fails due to insufficient funds, and usually match the late payment fee.

These fees are avoidable with careful budgeting and account monitoring, but they add up quickly if you miss multiple payments. If you're self-employed as a tutor with variable income, setting up a buffer in your transaction account or using an offset account can help you avoid these charges during quieter months.

Comparison Rate and Total Cost

The comparison rate is a tool designed to help you assess the true cost of a loan by combining the interest rate with most standard fees. It's expressed as a single percentage and based on a $150,000 loan over 25 years.

The comparison rate doesn't include all fees, such as redraw fees, offset account fees, or early repayment fees on fixed portions of a split loan. It also assumes you'll hold the loan for the full 25 years, which doesn't reflect how most borrowers use their loans. Use the comparison rate as a starting point, but calculate the actual cost based on your loan amount, expected loan term, and the specific fees that apply to your situation. If you're looking at getting a lower interest rate, don't focus solely on the advertised rate without accounting for ongoing fees.

What Tutors Should Watch For

Tutors with irregular income or a mix of employed and self-employed work should pay attention to fees that affect flexibility. Redraw fees, offset account charges, and limits on extra repayments can restrict your ability to manage cash flow during lean periods.

We regularly see tutors who choose loans based on the advertised rate without considering how fees interact with their income patterns. A loan with no monthly offset fee and unlimited redraws may cost less over time than a loan with a slightly lower rate but a $15 monthly offset charge and $30 redraw fees. If you're self-employed or working multiple tutoring contracts, speak to a broker who understands how these fee structures affect your situation.

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