Understanding home loan fees
When you’re thinking about getting a home loan it’s important to remember that it’s not just a deposit you’ll need to save up for, there are fees you’ll need to cover as well.
September 04, 2019 • 7 min read
Application fee
This fee goes by many different names including: establishment fee, set-up/start-up fee, or application fee. Essentially this fee is a one-off cost for applying for a home loan. The cost of an application fee varies depending on the lender (anywhere from $150 to $600), but Tiimely Own home loans have no application fee at all.
Valuation fee
When you apply for a home loan, your lender will obtain a valuation of the property you are looking at buying. A valuation determines the value of your property, which in turn helps the lender determine your Loan-to-value Ratio (LVR). Your lender will use your LVR to determine whether you will need to pay Lenders’ Mortgage Insurance (LMI), i.e. if your LVR is higher than 80% of the property’s value, you will probably need to pay LMI. A valuation can cost you between $100 to $350, but with a Tiimely Own home loan, we absorb this fee.
Preparation of mortgage docs
A preparation of mortgage documents fee covers the cost of preparing your loan documents. Lenders will sometimes include the document preparation fee under other costs (e.g. the application fee or conveyancing fees), but with a Tiimely Own home loan, we don’t charge this fee at all.
Monthly service fee
A monthly service fee is charged to cover the administration costs of your loan. You’ll need to pay this fee every month for the life of your loan. For customers with our Tiimely Own home loan product with an offset facility (including customers who need to borrow more than 80% of the security value) there is a monthly fee of $15 per month.
Redraw fee
If you were to redraw from your home loan after paying some additional repayments, you may incur a fee. Other lenders charge for this feature, however, a Tiimely Own home loan, like some lenders, offer a free redraw facility.
Extra repayment charges
Just like a redraw fee, some lenders will charge you if you wish to make extra repayments on your home loan to try and pay it off quicker. The cost will vary depending on your lender, but, with a Tiimely Own home loan, we don’t charge a fee for this (we just have an annual maximum of $20,000 p.a. extra repayments for fixed rate loans)
Offset account/s
An offset facility is a feature that allows you to link up to 6 offset accounts to your home loan and the interest you earn from these accounts is subtracted from the interest you pay on your loan balance. Some lenders will increase the interest rate of the home loan to compensate for the cost.
For more info on offset accounts, check out: What’s an offset account?
Can I avoid paying fees?
Unfortunately, there’s no way you can avoid paying all these fees, at the very least you’ll need to pay the fees set by the government. A quick and easy way you can get an idea of the amount of fees associated with a home is by looking at the comparison rate. If the comparison rate is significantly higher than the interest rate, you can safely assume that there are extra costs associated with that home loan. Not all lenders charge the same fees so make sure you do your homework to avoid paying unnecessary fees.
