If you’re a first home buyer in Australia, understanding mortgage fees is just as important as choosing the right interest rate. These fees can significantly affect the total cost of your loan—and if you’re not aware of them upfront, they can catch you off guard. From application and valuation fees to discharge and ongoing service charges, even a loan that looks competitive at first glance can end up costing thousands more than expected over time.
In this guide, we’ll walk you through all the mortgage fees you need to know about, explain what they mean in plain English, and show you how to reduce them wherever possible. This is your roadmap to making smarter decisions, saving money, and buying your first home with confidence. We will also show you how working with a trusted mortgage broker in Brisbane can give you the edge.
What Are Mortgage Fees?
When you’re buying your first home, it’s easy to focus mainly on the interest rate. But there’s another important cost you need to understand: mortgage fees. These fees are the extra charges lenders add on top of your interest rate. They cover a range of services and administrative costs involved in setting up and managing your home loan. Unlike interest, which is the cost of borrowing money calculated over time, mortgage fees are typically fixed charges you pay at various stages of your loan.
How Mortgage Fees Differ from Loan Interest
Interest is the percentage you pay on the amount you borrow, which accrues daily and can change if you have a variable rate. Mortgage fees, on the other hand, are separate, one-off or ongoing charges that cover specific costs. For example, your lender might charge a $500 loan application fee upfront or a small monthly service fee to keep your loan account active. While interest impacts your overall repayments throughout the loan term, mortgage fees are discrete costs that can add up if you’re not careful.
Types of Mortgage Fees: Upfront, Ongoing, and Exit Fees
Mortgage fees fall into three main categories:
- Upfront fees are charged when you apply for the loan. This includes application fees, property valuation costs, and legal or settlement fees. These fees cover the work your lender does to assess your application and secure your property as collateral.
- Ongoing fees apply throughout the life of your loan. These can be monthly or annual service fees for managing your loan account, fees for features like redraw facilities or offset accounts, or package fees that come with bundled home loan products.
- Exit fees occur when you pay off your loan, refinance, or sell your home. Common exit fees include discharge fees and break costs if you have a fixed-rate loan and repay early.
Why Do Lenders Charge Mortgage Fees?
Lenders charge mortgage fees to cover the administrative costs of processing and managing your loan. This includes tasks like credit checks, verifying your financial information, ordering property valuations, and preparing legal documents. Many of these services are handled by third-party providers, and the fees you pay reimburse the lender for these expenses.
Mortgage fees also reflect the risk the lender takes when approving your loan. For example, if your deposit is less than 20%, you’ll usually pay Lender’s Mortgage Insurance (LMI), which protects the lender if you can’t repay your loan. This isn’t a fee you pay directly to the lender but an essential part of the mortgage fee structure in Australia.
How a Mortgage Broker Can Help Reduce Your Mortgage Fees
The good news is you don’t have to accept all mortgage fees at face value. Many lenders are willing to waive or reduce certain fees to win your business. That’s where a trusted mortgage broker comes in. Brokers have the experience and lender contacts to negotiate better deals and help you avoid unnecessary fees. At Hunter Galloway, we make sure you understand every fee involved and work to minimise your costs without compromising your loan quality.
Take Control by Understanding Mortgage Fees
Knowing what mortgage fees are, why they exist, and when they apply puts you in the driver’s seat as a first home buyer. With the right information and expert advice, you can avoid surprises and find a home loan that fits your budget and goals. Understanding these fees is one of the smartest steps you can take towards owning your first home in Australia.
Common Types Of Mortgage Fees In Australia
Upfront Fees
- Loan application fee covers the lender’s costs to process and assess your home loan application. It generally includes things like credit checks, initial paperwork, and other administrative tasks. Depending on the lender, this fee can range from $0 to around $600. However, some lenders may waive the application fee as part of a promotional offer or if you apply through a mortgage broker.
- Property valuation fee covers the cost of hiring an independent professional to assess the market value of the property you’re looking to buy. This valuation helps the lender determine the security value of the home for the purpose of your loan. The fee typically ranges from $200 to $500, depending on the property’s location and complexity. While some lenders absorb this cost, it’s often passed on to the borrower.
- Settlement fee is charged when your home loan is drawn down, and settlement takes place. It covers the lender’s administrative costs for registering the mortgage with the relevant land titles office. This fee usually ranges between $100 and $300. It ensures that your property title is legally secured as collateral for the loan.
- Lender’s legal fees cover the legal work involved in preparing your home loan documents and contracts. This can include reviewing title searches, mortgage documents, and other legal paperwork. These fees vary between lenders—some include them in their overall costs, while others charge them separately. In some cases, you may be able to use your own solicitor or conveyancer to help manage or reduce these costs.
Ongoing Fees
- Monthly or annual loan service fees are charged to cover the ongoing management and administration of your home loan account. These fees typically range from $5 to $15 per month or a comparable amount annually. Some lenders may waive them if you bundle other financial products or meet certain repayment conditions. Over time, avoiding or minimising these fees can save you hundreds of dollars throughout the life of your loan.
- Offset account fees may apply if you have an offset account linked to your home loan. These fees cover the cost of maintaining the account, which works to reduce the interest you pay by offsetting your loan balance with your savings. While offset accounts can offer significant interest savings, they often come with a small monthly fee. It’s important to weigh these fees against the potential interest savings to determine if the account is financially worthwhile for your situation.
- Redraw facility fees are charged when you access extra repayments you’ve made above your minimum loan repayments. Depending on the lender, fees may be charged per transaction or as a small ongoing monthly fee. While a redraw facility offers valuable flexibility by letting you tap into surplus funds, it can come with minor costs. Understanding when and how much you’ll be charged can help you manage your loan more effectively.
Exit Fees
- Discharge fees are payable when you pay off your home loan in full, refinance with another lender, or sell your property. They cover the lender’s administrative work involved in removing the mortgage from your property title. These fees typically range from $150 to $600, depending on the lender. It’s important to factor this cost into your budget when planning to finalise or switch your loan.
- Break costs apply mainly if you repay a fixed-rate home loan early or refinance before the fixed term ends. These fees compensate the lender for the loss of expected interest due to your early exit. The amount is calculated based on the difference between your fixed rate and current market rates, as well as the time remaining on your loan term. Break costs can be substantial, so it’s crucial to review the terms of your fixed-rate loan before making any changes.
- Early repayment fees may apply to older home loans or certain fixed-term loans if you make extra repayments or pay off the loan ahead of schedule. These fees are designed to protect the lender’s expected income over the agreed loan term. They’re often charged as a fixed amount or a percentage of the early repayment. It’s essential to review your loan contract carefully to understand any potential penalties before making additional repayments or settling your loan early.
Government Fees and Charges
When you think of mortgage fees, it’s important to understand how government fees and charges fit into the picture. While these aren’t technically mortgage fees charged by your lender, they are unavoidable costs that come with buying a home in Australia, and you need to budget for them in the same way you would for the other mortgage fees.
Stamp Duty
Stamp duty is one of the largest government charges you’ll face when buying a property. Although it’s not a mortgage fee, it’s a state government tax on property transactions that can significantly increase your upfront costs. Each state and territory sets its own rates and rules—for example, New South Wales charges stamp duty based on the property’s value, while Queensland offers concessions for first-home buyers. Knowing these differences helps you plan your finances better.
Registration Fees
Another government cost to keep in mind is the registration fees. These fees cover the Land Titles Office charges for registering your mortgage and transferring the property title into your name. They vary by state but typically range from a few hundred dollars to over $1,000, depending on the property value and location.
First Home Buyer Exemptions and Concessions
If you’re a first home buyer, you might qualify for exemptions or concessions that reduce or even eliminate some of these government charges, especially stamp duty. These incentives differ between states and have eligibility criteria, such as property price caps or owner-occupier requirements. Understanding these programs can save you thousands, so it pays to check what support is available where you’re buying.
By factoring in these government fees alongside your mortgage fees, you get a clearer picture of the full cost of buying your first home.
Read more: First home guarantee
Lender's Mortgage Insurance (LMI)
When you’re buying your first home, one of the biggest additional costs you might encounter—besides the obvious mortgage fees—is Lender’s Mortgage Insurance (LMI). Understanding what LMI is, when it applies, and how it works can save you money and help you plan your home loan strategy more effectively.
What Is Lender's Mortgage Insurance (LMI)?
LMI is an insurance policy that protects your lender—not you—as the borrower. It kicks in when your deposit is less than 20% of the property’s purchase price or valuation. This means if you’re borrowing more than 80% of the home’s value, lenders require LMI to cover themselves in case you default on your loan. It’s important to know that LMI is not a fee charged by the lender for processing your loan—it’s an insurance premium that protects the lender’s risk, not your own financial security.
When Does LMI Apply?
If your deposit is below the 20% threshold, you will almost certainly need to pay LMI. This is common among first home buyers who might find it challenging to save a large deposit in today’s housing market. The smaller your deposit, the higher the risk for the lender—and the higher the LMI cost will be. On the flip side, if you can save at least 20% of the property value, you can avoid LMI entirely.
How Much Does LMI Cost?
LMI costs vary widely depending on your deposit size, loan amount, and lender policies. Typically, the cost ranges from around 1% to over 4% of the total loan amount. For example, if you borrow $400,000 with a 10% deposit, your LMI could be anywhere between $4,000 and $16,000. This cost is usually added to your loan amount rather than paid upfront, which means you’ll also pay interest on it over time. Understanding how much LMI will add to your overall mortgage costs is crucial to budgeting effectively.
How to Avoid LMI
The good news is you don’t always have to pay LMI if you have a smaller deposit. One common strategy is using a guarantor loan, where a family member offers their property as additional security for your loan. This reduces the lender’s risk and can help you avoid or reduce LMI. Another option is to save a larger deposit, aiming for the 20% mark or more, which eliminates the need for LMI altogether. While this might delay your purchase, it can save you thousands in the long run.
Working With a Mortgage Broker to Manage LMI
Navigating LMI costs and options can be tricky, especially when you’re a first home buyer. A mortgage broker like Hunter Galloway can help you understand when LMI applies, how much it will cost, and whether a guarantor loan or other strategies might work for you. We’ll guide you through the process of comparing lenders’ policies and finding the best loan structure to minimise your overall mortgage fees and costs.
Optional (But Common) Third-Party Costs
When you’re buying your first home, it’s easy to focus on lender mortgage fees and government charges, but don’t overlook the optional yet common third-party costs. These fees, while not always mandatory, are crucial for protecting your investment and ensuring a smooth transaction.
Conveyancing or Solicitor Fees
Conveyancing is the legal process of transferring property ownership from the seller to you. Whether you hire a conveyancer or a solicitor, you’ll pay fees typically ranging between $800 and $2,000 depending on the complexity of the sale and your location. These professionals review contracts, manage settlement processes, and ensure your interests are protected. Using a qualified conveyancer helps avoid legal pitfalls and costly mistakes during settlement.
Building and Pest Inspections
Before you sign on the dotted line, it’s wise to arrange building and pest inspections. These inspections reveal hidden structural issues, termite damage, or pest infestations that could cost you thousands down the track. Expect to pay around $300 to $600 for a thorough inspection. While not strictly a mortgage fee, skipping this step could expose you to unforeseen expenses and reduce your property’s value.
Home Insurance and Income Protection Insurance
Lenders often require you to have home insurance in place from settlement day to protect their security interest in the property. Home insurance covers damage from fire, storms, or theft and usually costs several hundred dollars annually. Additionally, income protection insurance isn’t mandatory but provides financial security if you can’t work due to illness or injury. These insurance costs are important ongoing expenses to consider alongside your mortgage fees.
Mortgage Broker Fees (If Applicable)
If you use a mortgage broker, some may charge a broker fee or commission for their services. Many brokers, including Hunter Galloway, offer their expertise free to borrowers because they earn commissions from lenders. However, in some cases—especially for complex loans or self-employed borrowers—broker fees may apply, typically ranging from a few hundred to a couple thousand dollars. Always clarify fees upfront to avoid surprises and ensure you’re getting the best value for your money.
While these third-party costs aren’t always labelled as mortgage fees, they are essential parts of the home-buying journey. Being prepared for them helps you budget more accurately and avoid unexpected financial stress.
Comparing Mortgage Fees Between Lenders
When you’re searching for the right home loan, understanding and comparing mortgage fees between lenders is critical. It’s not just about the interest rate—fees can add up quickly and impact your overall loan cost. Here’s how you can make smart comparisons to find the best deal for you.
Use the Loan Comparison Rate to Spot Hidden Fees
The loan comparison rate is designed to give you a clearer picture of the true cost of a loan, including both interest and most common fees. When comparing loans, look beyond the headline interest rate and check the comparison rate. This rate helps reveal hidden fees and ongoing charges that might otherwise catch you off guard.
Ask for a Key Facts Sheet from Each Lender
Every lender must provide a Key Facts Sheet that clearly outlines the fees, charges, and loan features. Request this document before you sign anything, and review it carefully. It breaks down application fees, ongoing fees, discharge fees, and any special conditions. This transparency empowers you to compare apples with apples across different loan products.
Use Online Comparison Tools
Many websites and financial platforms offer free online tools to compare home loans and their associated fees. These tools can filter loans by fee amount, loan type, or lender reputation. They save you time and help identify lenders offering low-fee or fee-free loans. However, always verify the details directly with the lender, as offers and fees can change.
Beware of "Fee-Free" Claims
Some lenders advertise “no fees” or “fee-free” loans, but these deals can be misleading. Often, fees are shifted into higher interest rates or hidden in other costs, increasing your overall repayments. Always look beyond marketing claims and analyse the total cost of borrowing—including fees and interest—before making a decision.
By taking these steps, you can confidently compare mortgage fees across lenders and choose a loan that suits your budget and homeownership goals. Don’t hesitate to work with a trusted mortgage broker to help you navigate these details and uncover the best options.
How To Reduce Or Avoid Mortgage Fees
Mortgage fees can add up quickly, especially for first home buyers who are already managing upfront costs like deposits and government charges. But the good news is that you don’t have to accept all fees at face value. By understanding your options and being proactive, you can reduce or sometimes avoid these fees altogether — saving thousands over the life of your loan.
Negotiate Directly with the Lender
Many borrowers don’t realise that mortgage fees are often negotiable. Lenders want your business and are willing to waive or reduce certain fees, particularly for new customers with a strong financial profile. Don’t hesitate to ask about waiving application fees, valuation fees, or ongoing account-keeping fees. A simple phone call or email can be enough to get a better deal. If you’ve found a lower fee elsewhere, use that as leverage to negotiate with your preferred lender. Remember, lenders value your loan amount and repayment reliability, so it pays to ask.
Look for Package Loans That Bundle Services
Some lenders offer package deals that bundle your home loan with other financial products such as offset accounts, credit cards, or transaction accounts. These loan packages often come with reduced or waived fees, making them a cost-effective option if you plan to use those additional services. For example, a package might waive your ongoing monthly fees and provide a discounted interest rate. However, always check the fine print — some packages may have higher interest rates or require you to maintain a minimum balance. Consider whether the bundled services match your banking habits before signing up.
Take Advantage of Cashback Offers
Cashback offers are another way lenders compete to attract borrowers and can help offset upfront mortgage fees. These promotions typically refund a portion of your application, valuation, or settlement fees if you take out a home loan with that lender. For example, you might receive a $1,000 cashback after settlement to reduce your initial costs. While cashback offers can be appealing, make sure you factor these incentives into your total loan cost and compare with other lenders. Sometimes, a loan with a slightly higher rate but no fees and a cashback offer might be more affordable overall.
Use a Mortgage Broker to Identify Low-Fee Home Loans
Navigating the maze of mortgage fees and loan products can be overwhelming — especially if you’re buying your first home. That’s where a mortgage broker adds real value. Brokers have access to a wide range of lenders and can identify loans with the lowest mortgage fees tailored to your financial situation. They also have experience negotiating fee waivers and spotting hidden costs that you might miss. Using a broker means you save time, reduce stress, and potentially save thousands by avoiding unnecessary fees.
Other Tips to Consider
- Combine fees where possible: Some lenders allow you to bundle valuation and application fees.
- Ask about fee waivers for hardship: If you experience financial difficulty, some lenders may waive fees temporarily.
- Review fees annually: Even after settling, keep an eye on ongoing fees and ask your lender for discounts or to switch to a no-fee loan if possible.
If you want expert advice tailored to your circumstances, speak to a trusted mortgage broker who can help you unlock the best low-fee home loans available.
True Cost Of Mortgage Fees Over Time
When choosing your home loan, it’s easy to focus on the headline interest rate, but understanding the true cost of mortgage fees over the life of your loan is just as important. These fees—whether upfront, ongoing, or exit-related—can significantly impact your total repayments, so knowing how they add up over time helps you make smarter decisions.
Sample Comparison: Two Loans with Different Mortgage Fee Structures
Imagine you’re comparing two home loans for $850,000 over 30 years:
- Loan A has a low interest rate of 5.0% but charges $600 upfront and a $10 monthly ongoing fee.
- Loan B has a slightly higher interest rate of 5.1% but no upfront or ongoing fees.
Now, we are going to calculate how much you will pay over the life of each loan to determine which loan is the cheapest.
Loan A – Lower rate, fees included
- Monthly repayments (principal & interest) at 5.0% = about $4,566
- Upfront fees = $600
- Ongoing fees = $10/month × 12 months × 30 years = $3,600
- Total fees = $600 + $3,600 = $4,200
- Total repayments over 30 years = ($4,566 × 12 × 30) + $4,200 = $1,644,960 + $4,200 = $1,649,160
Loan B – Slightly higher rate, no fees
- Monthly repayments at 5.1% = about $4,625
- Upfront fees = $0
- Ongoing fees = $0
- Total repayments over 30 years = $4,625 × 12 × 30 = $1,665,000
Loan A’s total cost over 30 years is approximately $1,649,160, while Loan B’s total cost is around $1,665,000. This means Loan A could save you about $15,840 over the life of the loan despite the fees.
However, if you plan to refinance or pay off your loan early, those upfront and ongoing fees on Loan A might make Loan B more cost-effective. Always consider your own circumstances and loan term when comparing offers.
Long-Term Impact on Total Repayments
Mortgage fees can inflate your loan balance or monthly repayments, increasing the amount you pay over the loan term. Even small fees, when multiplied by hundreds of months, can add thousands to your total cost. This is why it’s crucial to look beyond initial fees and consider the cumulative effect of ongoing and exit fees. A loan with zero upfront fees but high ongoing charges might cost more in the long run than a loan with higher upfront fees but no ongoing costs.
How Small Ongoing Fees Add Up
Ongoing fees might seem minor—say $5 to $15 per month—but over 25 or 30 years, they become a substantial expense. For example, a $10 monthly fee adds up to $3,600 over 30 years, not including inflation or interest on that amount. Many borrowers overlook these fees during their initial loan comparison, focusing solely on interest rates. Being aware of how these small fees accumulate ensures you pick a loan structure that truly fits your financial goals.
Understanding the true cost of mortgage fees helps you avoid surprises and choose a home loan that keeps your repayments manageable throughout your homeownership journey. If you want a clear picture tailored to your situation, a mortgage broker can run detailed comparisons to reveal which loan offers the best long-term value for you.
FAQs Mortgage Fees In Australia
What are mortgage fees in Australia?
Mortgage fees are the various costs charged by lenders and third parties when setting up, maintaining, or exiting a home loan. They include application fees, valuation fees, ongoing service fees, and discharge fees. Some fees are upfront, while others are ongoing or charged when you refinance or pay out your loan. Understanding them helps you compare loans more effectively.
How much are typical home loan fees in Australia?
Typical home loan fees range from $300 to $1,500 upfront, plus any ongoing monthly fees between $5 and $15. Lender’s Mortgage Insurance (LMI) can add thousands if your deposit is under 20%. Exit fees, such as discharge fees, may cost around $300–$500. However, many lenders offer promotions that waive some of these fees.
Can I avoid paying mortgage fees?
You can avoid some mortgage fees by negotiating with lenders or choosing loans with promotional offers. Many lenders waive application fees or valuation fees for new customers. You might also avoid ongoing fees by selecting a basic home loan with no package features. However, fees like government charges and conveyancing are usually unavoidable.
Are mortgage fees tax deductible?
Most mortgage fees for your primary residence are not tax-deductible. However, if the property is an investment, you may claim some fees as tax deductions. This can include loan establishment fees and ongoing service charges. Always check with a tax adviser for up-to-date rules.
What is the discharge fee on a mortgage?
A discharge fee is a cost you pay when closing your home loan account, either because you’ve repaid the loan or are refinancing. It usually ranges between $150 and $600, depending on the lender. It covers paperwork, legal checks, and title changes. You must factor this fee in when considering refinancing.
Why do lenders charge mortgage fees?
Lenders charge fees to cover the cost of processing, administering, and securing your loan. These include paying for valuation reports, legal checks, and account maintenance. Some fees also act as revenue to offset low advertised interest rates. Understanding these charges can help you negotiate better loan terms.
What is Lender's Mortgage Insurance (LMI)?
Lender’s Mortgage Insurance protects the lender—not you—if you default on the loan. It applies when your deposit is less than 20% of the property price. The cost depends on your loan amount and deposit size, and it can be thousands of dollars. It’s often added to your loan balance unless paid upfront.
Do all lenders charge the same mortgage fees?
No, mortgage fees vary widely between lenders. Some banks charge higher upfront fees but lower ongoing costs, while others waive fees in exchange for a higher interest rate. Comparing fee structures is essential to find the best value loan. Always review the Key Facts Sheet for a full breakdown.
What is a comparison rate, and how does it include fees?
A comparison rate combines the interest rate and most upfront and ongoing fees into a single percentage figure. It helps borrowers compare the true cost of different home loans. However, it may exclude some less common fees like break costs or redraw charges. Use it alongside a detailed fee list for the full picture.
Can a mortgage broker help reduce home loan fees?
Yes, a mortgage broker can help you find lenders offering low-fee or fee-free home loan options. Brokers often have access to special deals and promotions not advertised publicly. They also understand how to compare loans beyond the interest rate. Best of all, their services are usually free for the borrower.
Final Thoughts: Don't Let Mortgage Fees Catch You Off Guard
Understanding mortgage fees is just as important as comparing interest rates. These fees can add thousands of dollars to the cost of your loan over time, so it’s crucial to know what you’re paying for—and why. From application and valuation fees to ongoing account charges and discharge costs, every dollar counts when you’re budgeting for a home.
If you’re a first home buyer, don’t be afraid to ask questions and read the fine print. Some fees may be negotiable or waived under certain conditions, especially if you go through a mortgage broker. Knowing what to expect can help you avoid surprises and make more informed decisions throughout your home-buying journey.
Before you commit to any loan, consider getting pre-approval and speaking to a professional. A mortgage broker or financial adviser can help you understand all the costs involved, compare lenders, and find a deal that suits your financial situation. Taking this step could save you time, stress, and money in the long run.
Next Steps And Getting Your Home Loan Approved
Our team at Hunter Galloway is here to help you buy a home in Australia. Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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