Investment Loan Fees & Variable Rate Costs Explained

What You Actually Pay on a Variable Rate Investment Loan

A variable rate investment loan carries fees beyond the advertised interest rate. You'll typically pay an application or establishment fee between $300 and $1,000, an annual package fee if you want discounted rates or extra features, and ongoing account-keeping charges that some lenders waive. Settlement fees, valuation costs, and legal fees add another layer, and if your deposit sits below 20 per cent, Lenders Mortgage Insurance becomes the single largest upfront cost.

The structure you choose changes what you pay. Interest-only periods keep repayments lower during the first few years, which is common for investment property finance, but you're not reducing the principal. Principal and interest repayments cost more each month, yet they reduce the loan balance and the total interest paid over time.

Application and Establishment Fees

Most lenders charge an application fee to process your loan, covering credit checks, document review, and initial underwriting. The fee usually sits between $300 and $600, though some lenders charge up to $1,000 for more complex scenarios or higher loan amounts. A small number of lenders waive this fee entirely as part of their pricing model, particularly for borrowers with strong deposit positions or existing banking relationships.

Consider a buyer purchasing a unit in one of the established complexes near Karrinyup. With a 25 per cent deposit and straightforward PAYG income, several lenders would waive the application fee entirely. A self-employed borrower purchasing a duplex in Baldivis with a 15 per cent deposit and rental income from an existing property might face the full $1,000 establishment fee because the assessment takes longer and involves more documentation.

Ongoing Account Fees and Package Costs

Variable rate loans for investment purposes often come with an annual package fee if you want access to offset accounts, fee-free extra repayments, or a discounted interest rate. Package fees range from $300 to $400 per year. Some lenders bundle home and investment loans together under one package, spreading the cost across both facilities. If the interest rate discount exceeds 0.50 per cent, the package fee usually pays for itself within the first year.

Account-keeping fees are less common than they used to be. When they do appear, they're typically $10 to $15 per month. Most lenders have moved away from monthly account fees in favour of annual package fees or higher base rates with no ongoing charges.

Valuation and Settlement Costs

Every lender requires a property valuation before approving the loan. Valuation fees depend on property type and location, usually between $200 and $400 for a standard residential property. If you're purchasing a property in a regional area or something unusual like a strata-titled villa with shared facilities, the valuation fee can reach $600 or more.

Settlement fees cover the lender's legal and administrative costs when the loan is drawn down. Expect $150 to $300, sometimes rolled into the establishment fee. Your conveyancer or solicitor will charge separately for their work, typically $1,200 to $2,000 depending on the complexity of the transaction and whether you're also dealing with existing debt, refinancing, or equity release from another property.

Lenders Mortgage Insurance for Investment Loans

Lenders Mortgage Insurance protects the lender if you default, and it applies to most investment loans where the loan-to-value ratio exceeds 80 per cent. LMI premiums are calculated as a percentage of the loan amount, and the percentage increases as your deposit shrinks. At 85 per cent LVR, the premium might be 1.5 per cent of the loan amount. At 90 per cent LVR, it can reach 3 per cent or more.

LMI is usually capitalised into the loan, meaning you don't pay it upfront but you do pay interest on it for the life of the loan. Some lenders offer LMI waivers for certain professions or if you meet specific criteria, though these are less common for investment lending than for owner-occupier loans. The rules around Lenders Mortgage Insurance are similar, but investment loans are assessed more conservatively.

Interest Rate Discounts and Negotiation

The advertised variable rate is rarely the rate you'll pay. Most lenders offer discounts based on loan size, deposit amount, or whether you hold other products with the bank. A discount of 0.50 to 0.90 per cent off the standard variable rate is typical for investment loans with strong serviceability and a deposit above 20 per cent.

Rate discounts are negotiable, particularly if you're refinancing or consolidating multiple loans. Lenders are more willing to sharpen their pricing if you're borrowing above $500,000, have minimal other debt, and can demonstrate stable rental income from the property or other investments. If you're expanding your portfolio and already have investment property elsewhere, some lenders will extend the same discount across all facilities.

Offset Accounts and Redraw Facilities

An offset account linked to your investment loan reduces the interest charged by offsetting your savings balance against the loan principal. If you have $20,000 in the offset and a loan balance of $400,000, you only pay interest on $380,000. Offset accounts typically require a package fee, but they're useful if you're holding funds for future purchases, managing rental income, or building a buffer for vacancy periods.

Redraw facilities let you access extra repayments you've made above the minimum. Not all variable rate investment loans include free redraw, and some lenders charge $20 to $50 per withdrawal. If you plan to make lump sum payments when rental income is strong and withdraw funds later for property maintenance or portfolio expansion, confirm the redraw terms before you sign.

Rate Changes and How They Affect Repayments

Variable rates move in response to Reserve Bank decisions and lender funding costs. A 0.25 per cent rate increase on a $400,000 loan adds roughly $65 per month to a principal and interest repayment, or around $85 if you're on an interest-only period. Over a year, that's an extra $780 to $1,020 in repayments.

Most variable rate investment loans don't lock you into a specific repayment schedule the way fixed loans do. You can increase repayments during strong rental periods or reduce them to the minimum if the property sits vacant. That flexibility is the main reason investors choose variable rates, particularly in areas like Perth's southern corridor where vacancy rates fluctuate depending on mining employment cycles.

Switching Between Interest-Only and Principal and Interest

Many lenders let you switch from interest-only to principal and interest repayments during the loan term, though some charge a fee of $150 to $300 for the change. Interest-only periods are usually capped at five years, after which the loan automatically converts to principal and interest unless you apply for an extension.

If you're holding the property for long-term capital growth and rental yield, starting on interest-only keeps your cash flow manageable while you build equity elsewhere. Switching to principal and interest later reduces the loan balance faster and can lower the total interest paid, particularly if you're approaching retirement or planning to sell within a decade.

Loan Portability and Discharge Fees

Portability lets you transfer your existing loan to a new property without discharging and reapplying. Not all lenders offer this feature, and those that do may charge a portability fee of $150 to $500. If you're planning to sell your current investment property and purchase another within a short window, portability can save you a full round of application and establishment fees.

Discharge fees apply when you pay out the loan or refinance to another lender. Expect $300 to $500, covering the lender's administrative and legal costs to release the mortgage. Some lenders waive the discharge fee if you're refinancing internally or consolidating multiple loans within the same institution.

Split Rate Structures and Partial Fixes

Some borrowers split their investment loan between variable and fixed portions, paying variable rates on part of the balance and locking in a fixed rate on the rest. This approach spreads the risk of rate movements while maintaining access to offset and redraw on the variable portion. Lenders don't typically charge extra to split a loan at the time of application, though each portion may carry its own annual fee if packaged separately.

If you're holding multiple investment properties, a split structure across different loans can smooth out repayment fluctuations. One property on full variable gives you maximum flexibility, another on partial fixed gives you some certainty, and together they balance cash flow risk.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structure for your specific borrowing scenario, compare what different lenders charge, and make sure you're not paying for features you won't use or missing out on discounts you're entitled to.

Frequently Asked Questions