What are the total bank charges for a home loan?

Bank charges for a home loan can be classified as upfront, ongoing, and exit fees. These charges can cost you thousands of dollars over the duration of your loan. Some of the fees may even be payable before the lender will accept your loan application. Here are the various home loan-related fees that may apply.

Upfront fees

These charges are paid at the start of the loan, and lenders rarely approve your application without such fees. Sometimes, however, lenders may waive upfront fees to attract more customers.

Not all of these fees are paid to your bank or mortgage lender - for example, taxes and duties may be paid to your state government, while fees for related services may be paid to the service providers. 

Upfront fees may include the following:

• Application fees: Also known as establishment costs or home loan processing fees, this amount is used to cover the documentation cost. It is a one-time fee that may range  from $200 to $700 based on the size of the loan.
• Valuation charges: These cover the cost of valuing the property, which helps lenders determine whether the loan amount and your deposit are adequate. Although some lenders offer a free property valuation, often the charges vary between $100 and $300.
• Government charges: These cover the stamp duty payable on the property. The stamp duty varies if you're a first-time homebuyer. The cost also varies between different states and depends on the property price.
• Conveyancing fees: The property title is transferred from the seller to the buyer at the time of loan settlement. The conveyancing fees can be between $700 and $2,500.
• Legal costs: A legal team handles the loan contract, and these costs cover the expenses for preparing the documents and other legal services. These fees can be over $100.
• Mortgage registration fees: These are charged by the territory and state governments to register the property as collateral to cover the loan. The registration fee varies from one state to another and can be over $100.
• Search processing fees: These are paid to the lender to perform title and other searches. Often, this fee is $50 for each search.
• Lenders mortgage insurance (LMI): This is insurance that protects lenders against possible loan default. This cost can be avoided if you pay more than 20% of the property price as a deposit. LMI can cost you thousands of dollars, depending on your loan to value rato (LVR).

Ongoing fees and one-time charges

In addition to your monthly principal and interest repayment, you may need to pay ongoing fees to your bank or home loan provider. Some lenders may waive these as promotional offers, while a few institutions may not charge ongoing fees. You may also need to pay a fee each time you use one of the home loan's features.

Some of these charges include:

• Monthly service fees: These are associated with loan administration and servicing. The monthly fee can vary between $5 and $15.
• Redraw fees: Lenders may offer a redraw feature that allows you to withdraw any additional payment you've made during the loan duration. You may have to pay a redraw fee for each withdrawal, which can be up to $50.
• Annual fees: If you opt for a home loan as part of a package deal, you may have to pay annual fees associated with a lower rate of interest or other promotional offers. The annual fee may be between $300 and $400.
• Late payment charges: If you don’t pay the monthly repayment on time, you may be charged a late payment fee. Sometimes, the lender may provide some leeway; however, often, the late charge is $20.
• Switching fees: If you switch your fixed-rate home loan to a variable rate loan, you may pay switching fees, which vary from one lender to another.
• Portability fees:Home loan portability allows you to change the property while retaining the same loan. Although the portability fee varies between lenders, typically, it is approximately $200.

Exit fees

When you discharge the entire home loan, you may have to pay exit fees. Some of these fees include:

• Discharge fees: When the entire amount is repaid, you may need to pay discharge fees to cover the mortgage finalisation and related documentation costs. These can range between $350 and $500.
• Fixed-rate break costs: Breaking a fixed interest mortgage involves a penalty, which depends on the decrease in the interest rate. The break costs can amount to thousands of dollars.

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