Do you know the Variable Rate Loan Fees and Costs?

Understanding Variable Rate Loans for First Home Buyers

When buying your first home in Johnston, understanding the fees and costs associated with variable interest rate loans is essential. Variable rate loans offer flexibility that many first home buyers appreciate, but they come with various charges that can significantly impact your first home buyer budget.

A variable interest rate moves up or down based on market conditions and lender decisions. Unlike a fixed interest rate that stays the same for a set period, your repayments can change over time. This flexibility has both advantages and potential drawbacks for first home buyers.

Upfront Costs When Applying for a Home Loan

When you apply for a home loan, several upfront costs deserve your attention:

Application Fees: Some lenders charge between $250 and $600 to process your first home loan application. However, many lenders now waive this fee to remain attractive to borrowers.

Valuation Fees: Lenders require a professional property valuation, typically costing between $200 and $600 depending on the property's location and value. This ensures the property is worth the amount you're borrowing.

Settlement Fees: These cover the administrative costs of finalising your loan, usually ranging from $150 to $400.

Lenders Mortgage Insurance (LMI): If you're purchasing with a 5% deposit or 10% deposit, you'll likely need to pay LMI. This can cost thousands of dollars but protects the lender if you default on your loan. The First Home Loan Deposit Scheme and Regional first home buyer Guarantee can help you avoid this cost.

Ongoing Variable Rate Loan Costs

Beyond the initial expenses, variable rate loans include ongoing costs that affect your monthly budget:

Monthly Account Fees: Many lenders charge between $10 and $15 per month to maintain your home loan account. Over a 30-year loan, this adds up to thousands of dollars.

Annual Package Fees: If your variable rate loan is part of a package with other banking products, you might pay $300 to $400 annually. These packages often include benefits like interest rate discounts or fee waivers on transaction accounts.

Interest Charges: Your interest rate directly impacts your repayments. Variable interest rates in Australia can fluctuate, meaning your monthly payment might increase or decrease. Even a small change of 0.25% can affect your repayments by hundreds of dollars annually.

Useful Features and Their Potential Costs

Variable rate loans often include features that provide flexibility, but some come with conditions:

Offset Account: An offset account links to your home loan and reduces the interest you pay. The balance in this transaction account offsets your loan balance when calculating interest. Most variable rate loans include this feature at no extra cost, making it valuable for managing your first home buyer budget efficiently.

Redraw Facility: A redraw facility allows you to access extra repayments you've made on your loan. While many lenders offer this without charge, some impose fees of $10 to $50 per redraw transaction or set minimum redraw amounts.

Extra Repayments: Variable rate loans typically allow unlimited extra repayments without penalty, helping you pay off your loan faster and save on interest. This flexibility is a significant advantage over fixed interest rate loans.

Government Assistance and Concessions

First home buyers in Johnston can access several government programs that reduce overall costs:

First Home Owner Grants (FHOG): Depending on whether you're building or purchasing an existing property, you might qualify for grants that reduce your deposit requirements.

First Home Buyer Stamp Duty Concessions: These concessions can save you thousands in stamp duty, particularly valuable when managing low deposit options.

First Home Super Saver Scheme: This allows you to save money for your deposit inside your superannuation fund, where it benefits from tax advantages.

For those in the Northern Territory, exploring first home buyers in Johnston specific opportunities can reveal additional support.

Hidden Costs to Watch For

When reviewing your first home buyer checklist, don't overlook these potential charges:

Break Costs: If you want to exit your variable rate loan early (perhaps to refinance or sell), some lenders charge discharge fees of $150 to $500.

Rate Lock Fees: If you want to lock in your variable rate during the approval process, some lenders charge for this service.

Gift Deposit Documentation: If you're using a gift deposit from family members, lenders might require statutory declarations and additional verification, which can incur legal costs.

Comparing Home Loan Options

Before committing to any variable rate loan, compare multiple Home Loan options. Consider:

1. The comparison rate, which includes most fees and the interest rate
2. Whether features like offset accounts are included
3. The flexibility to make extra repayments
4. Any ongoing monthly or annual fees
5. The lender's reputation for customer service

Obtaining pre-approval helps you understand your borrowing capacity and gives you confidence when making offers on properties.

Making Your Variable Rate Loan Work for You

To maximise the benefits of your variable rate loan while minimising costs:

• Use an offset account effectively by directing your salary and savings into it
• Make extra repayments whenever possible to reduce interest charges
• Review your loan annually to ensure you're still receiving value
• Ask your lender about interest rate discounts for loyal customers
• Maintain a good credit history to qualify for better rates

Understanding First Home Buyer Eligibility

Meeting first home buyer eligibility requirements is crucial for accessing government schemes and concessions. Generally, you must:

• Be an Australian citizen or permanent resident
• Be at least 18 years old
• Never have owned property before
• Intend to live in the property as your primary residence

These criteria apply to programs like the First Home Loan Deposit Scheme, which can significantly reduce your upfront costs.

Planning Your First Home Buyer Budget

A comprehensive first home buyer budget should account for:

• Deposit (typically 5% to 20% of the property price)
• Stamp duty (unless you qualify for full concessions)
• Conveyancing and legal fees ($1,200 to $2,500)
• Building and pest inspections ($400 to $800)
• Moving costs
• Initial furniture and appliances
• Ongoing home maintenance (budget 1% of property value annually)

Understanding all variable rate loan fees and costs helps you plan accurately and avoid financial surprises during your first home loan application.

Getting Professional Guidance

Working with a mortgage broker who understands first home buyers in the Northern Territory can help you:

• Access lenders offering interest rate discounts
• Navigate complex government schemes
• Compare multiple Home Loan options efficiently
• Structure your loan to suit your financial situation
• Understand all fees before you commit

A broker can also help you explore whether a variable interest rate or fixed interest rate suits your circumstances, or whether a split loan combining both might be ideal.

Variable rate loans offer excellent flexibility for first home buyers in Johnston, but understanding every fee and cost ensures you make informed decisions that support your long-term financial wellbeing. Taking time to compare options, calculate total costs, and seek professional advice pays dividends throughout your homeownership journey.

Call one of our team or book an appointment at a time that works for you to discuss your variable rate loan options and discover how we can help you achieve your homeownership goals.