A variable interest rate home loan comes with ongoing fees that can add hundreds of dollars to your repayments each year, but many first home buyers only discover them after settlement.
When you're putting together your first home buyer budget, the fees attached to a variable rate loan matter just as much as the rate itself. Some lenders charge monthly account-keeping fees, others bundle services into an annual package, and a few charge nothing at all if you meet certain conditions.
Application and Upfront Fees
Most lenders charge an application fee when you submit your first home loan application. This typically sits between $250 and $600 and covers the cost of assessing your documents, verifying your income, and processing your loan.
Some lenders waive this fee as part of a promotion, particularly for first home buyers using government schemes like the Home Guarantee Scheme. Consider a couple in Riverstone applying for a home loan with a 5% deposit under this scheme. If their lender waives the $400 application fee, that saving goes straight into their budget for conveyancing or pest inspections. If they choose a lender that charges the fee, they need to have that amount ready in addition to their deposit and other upfront costs.
Ongoing Account Fees
Variable rate loans often include a monthly account-keeping fee. This can range from $10 to $25 per month, which works out to $120 to $300 per year. Over a 30-year loan, that's between $3,600 and $9,000 in fees alone.
Some lenders bundle this into a package that includes an offset account, redraw facilities, and fee-free transaction accounts. Others charge separately for each feature. In our experience, first home buyers in Riverstone who choose properties near the town centre or around Railway Terrace often benefit from offset accounts because they can keep their savings accessible while reducing interest charges. If your lender charges $15 per month for the account but $10 per month for the offset, you're paying $300 annually for features you might be using to save thousands in interest.
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Fees When You Make Extra Repayments
Variable rate loans generally let you make extra repayments without penalty, but some lenders cap this. If you pay more than the allowed amount in a year, you might face a fee.
As an example, a buyer working in one of the logistics centres near the M7 might receive a bonus or overtime payment and want to put $15,000 toward their loan. If their loan allows unlimited extra repayments, that money reduces their principal immediately. If their loan caps extra repayments at $10,000 per year and charges a fee for amounts above that, they'll need to decide whether paying the fee makes sense or whether they should hold the extra $5,000 until the next year.
What You Pay When You Access Your Money
A redraw facility lets you access extra repayments you've already made, but some lenders charge a fee each time you do this. The fee typically ranges from $20 to $50 per withdrawal.
If you're building a buffer in your loan by paying extra each month, but then need to access $3,000 for an urgent car repair, a $35 redraw fee might feel acceptable. If you're redrawing small amounts frequently, those fees add up quickly. An offset account avoids this problem entirely because your savings sit in a separate transaction account. You can access the money anytime without fees, and it still reduces the interest you're charged on your home loan.
Fees for Switching or Ending Your Loan
If you decide to refinance your home loan or sell your property, variable rate loans usually don't charge exit or break fees. However, some lenders charge a discharge fee to release the property title. This typically sits between $150 and $400.
Switching from a variable rate to a fixed interest rate on the same loan might also trigger fees. Some lenders treat this as a variation and charge $300 to $500 to process the change. If you're considering locking in a rate after settlement, check whether your lender charges for this before you apply.
Lenders Mortgage Insurance and When It Applies
If you're borrowing more than 80% of the property value, you'll usually pay Lenders Mortgage Insurance (LMI). This isn't technically a loan fee, but it's a significant upfront cost that gets added to loans with low deposit options like a 5% deposit or 10% deposit.
LMI can range from $3,000 to over $20,000 depending on your deposit size and loan amount. First home buyers in Riverstone using the Home Guarantee Scheme avoid LMI altogether because the government guarantees part of the loan. Without the scheme, a buyer purchasing a $650,000 property with a 10% deposit might pay around $12,000 in LMI. That amount usually gets capitalised into the loan, which means you're paying interest on it for the life of your mortgage.
Fees That Often Get Overlooked
Some lenders charge a settlement fee when your loan is finalised, typically between $100 and $300. Others charge a fee if you need to adjust your repayment amount or payment frequency after settlement.
If you set up a split loan, where part of your borrowing is on a variable interest rate and part is on a fixed interest rate, some lenders treat this as two separate loans and charge account-keeping fees for each portion. A buyer in Riverstone splitting a $600,000 loan into $300,000 variable and $300,000 fixed might pay $15 per month for each loan, which is $360 per year instead of $180.
How to Compare Fees Between Lenders
When you're comparing home loan options, write down every fee each lender charges and add them up over the first year. Include the application fee, monthly account fees, and any other costs that apply to how you plan to use the loan.
Two loans might have the same interest rate, but one could cost you $800 more per year in fees. Over five years, that's $4,000. For first home buyers managing a tight budget after settlement, that difference matters. Look for lenders who offer genuine value rather than just low rates, and make sure the loan structure matches how you'll actually use it.
Call one of our team or book an appointment at a time that works for you. We'll walk through the specific fees attached to each loan option and show you what you'd actually pay based on how you plan to manage your repayments.
Frequently Asked Questions
What fees do lenders charge on variable rate home loans?
Variable rate home loans typically include an application fee ($250 to $600), monthly account-keeping fees ($10 to $25 per month), and a discharge fee ($150 to $400) if you refinance or sell. Some lenders also charge for redraw facilities, loan variations, or settlement processing.
Can I avoid paying Lenders Mortgage Insurance as a first home buyer?
You can avoid LMI by saving a 20% deposit or using the Home Guarantee Scheme, which lets eligible first home buyers borrow up to 95% of the property value without paying LMI. The government guarantees part of your loan instead.
Do variable rate loans charge fees for extra repayments?
Most variable rate loans allow unlimited extra repayments without fees, but some lenders cap the amount you can pay above your minimum repayment each year. Exceeding that cap may trigger a fee, though this is less common on standard variable loans.
What's the difference between a redraw facility and an offset account?
A redraw facility lets you access extra repayments you've made, but many lenders charge $20 to $50 per withdrawal. An offset account is a separate transaction account where your savings reduce the interest charged on your loan, and you can access the money anytime without fees.
How much do ongoing account fees add up over time?
A monthly account-keeping fee of $15 per month costs $180 per year or $5,400 over 30 years. If you have a split loan structure with separate fees for each portion, you might pay double that amount annually.
