What You'll Actually Pay in Upfront Fees on a Variable Rate Loan
Most variable rate home loans come with an application fee ranging from $300 to $600, though some lenders waive this entirely. You'll also face valuation fees between $200 and $400, settlement fees from $150 to $350, and potentially a loan establishment fee that can reach $1,000 depending on the lender.
Consider a buyer purchasing in Salisbury with a 10% deposit. They've budgeted for stamp duty using South Australia's relief on new homes but haven't factored in lender fees. The application fee is $400, the valuation comes in at $250, and settlement costs another $200. That's $850 before the lender even processes the loan. If they're also paying for building and pest inspections at around $500 combined, plus conveyancing at roughly $1,500, the total cost to settle sits closer to $3,000. That amount needs to be held outside the deposit and can't usually be borrowed as part of the loan.
Some lenders advertise no application fees but recover the cost through a higher interest rate or by charging a higher ongoing monthly account fee. A $0 application fee sounds appealing until you realise the variable rate is 0.15% higher than a competitor charging $600 upfront. Over a year on a $400,000 loan, that rate difference costs $600. Over five years, it's $3,000. You've paid the fee either way.
Lenders Mortgage Insurance is often the largest cost for buyers using the Australian Government 5% Deposit Scheme. If you're borrowing with a deposit under 20% and not using the scheme, LMI can range from $5,000 to over $20,000 depending on your deposit size and loan amount. The premium is calculated on the lender's risk, and while it can be capitalised into the loan, it still increases your total borrowing and the interest you pay over time. LMI protects the lender, not you, so it's worth asking your broker whether accessing a government scheme to avoid it makes sense for your situation.
How Ongoing Account Fees Add Up Over Time
Variable rate loans typically charge a monthly account fee between $10 and $15. That's $120 to $180 per year, or $3,600 to $5,400 over a standard 30-year loan term. Some lenders include offset accounts or redraw facilities without additional charges, while others add $5 to $10 per month for each feature.
If you're comparing two loans with similar interest rates, check whether the offset account is included or costs extra. A $10 monthly offset fee over 30 years is $3,600. If the offset account saves you more than that in interest by keeping your savings against the loan balance, it's worth it. If you're not planning to maintain a balance in the offset, you're paying for a feature you won't use.
Packaged loans often waive monthly account fees in exchange for an annual package fee, usually $300 to $400. The package might also include a fee-free credit card, discounted insurance, or rate discounts. Run the numbers before committing. If the annual package fee is $395 and you're saving $15 per month in account fees, you've saved $180 over the year but paid $395 for the privilege. The package only makes sense if the other inclusions deliver value you'd otherwise pay for separately.
What Settlement and Discharge Costs Look Like in Salisbury
Settlement fees cover the lender's cost of preparing and lodging documents when your loan is finalised. Most lenders charge between $150 and $350. Discharge fees apply when you pay off the loan or refinance, and typically sit between $300 and $500. These are one-off costs but they're often overlooked when buyers are focused on the purchase price and deposit.
Salisbury sits within the City of Salisbury council area, and while council rates and water bills are factored into most buyers' budgets, settlement costs are less visible until you're weeks away from signing. In our experience, buyers assume their conveyancer's quote covers everything, but the lender's settlement and establishment fees are separate and need to be paid from your own funds before the loan is drawn down.
If you're planning to refinance within a few years to access equity or secure a lower rate, the discharge fee becomes relevant sooner than you think. A lender charging $150 to settle and $350 to discharge has lower total exit costs than one charging $300 and $500. If you're refinancing after three years, that $300 difference is a direct cost with no ongoing benefit. When refinancing is part of your long-term plan, factor discharge fees into your initial lender choice.
Do You Need to Pay for Mortgage Protection Insurance?
Mortgage protection insurance is optional and covers your loan repayments if you lose your income due to illness, injury, or redundancy. Premiums vary widely based on your age, occupation, loan size, and the level of cover, but expect to pay anywhere from $30 to $150 per month depending on your circumstances.
Lenders will offer mortgage protection insurance during the application process, but you're not required to take it through them. You can arrange income protection insurance independently, and in many cases the cover is broader and the premiums more competitive. The key difference is that mortgage protection insurance pays the lender directly, while income protection insurance pays you a monthly benefit that you can use for any expense, including your mortgage.
If you're weighing up whether to add this cost to your monthly budget, consider your existing safety net. Do you have sick leave, income protection through your employer, or savings that would cover three to six months of repayments? If not, some form of cover makes sense, but shop around rather than accepting the first offer from your lender. A $50 per month premium over 30 years is $18,000. Make sure the policy actually pays out in the situations you're most likely to face.
How to Reduce or Avoid Common First Home Buyer Costs
Some lenders waive application fees if you're a first home buyer or if you're applying through a mortgage broker. Others offer rate discounts that offset upfront fees within the first year. Ask your broker which lenders are currently running fee waivers, particularly for buyers in regional South Australia. Salisbury falls within the capital city and regional centres category under the Australian Government 5% Deposit Scheme, with a property price cap of $900,000, so you have access to the same range of lenders as buyers in Adelaide's inner suburbs.
Valuation fees are harder to avoid, but some lenders use automated valuation models for properties under a certain price threshold, which can reduce or eliminate the cost. If your property is a standard residential home in an established suburb like Salisbury, an automated valuation is more likely to be accepted than for a rural block or a unique property type.
If you're eligible for South Australia's $15,000 first home owner grant on a new home, that payment can be put toward upfront costs including lender fees, conveyancing, and inspections. The grant doesn't reduce the purchase price but it does give you breathing room to cover the costs that sit between contract and settlement. Stamp duty relief on new homes in South Australia has no price cap for contracts entered into after June 2024, which makes new builds in Salisbury particularly viable for buyers trying to reduce their cash outlay at settlement.
If you're considering a home loan with an offset account or redraw facility, confirm whether those features are included or charged separately. Some lenders offer both as standard on their variable rate products, while others reserve them for premium packages. If you're paying $395 per year for a package that includes an offset, but a different lender offers the same offset at no additional cost, you're $395 behind each year with no tangible benefit.
Want to know exactly what your upfront and ongoing costs will look like based on the lenders you're eligible for? Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What upfront fees do I pay on a variable rate home loan?
You'll typically pay an application fee between $300 and $600, a valuation fee of $200 to $400, and a settlement fee of $150 to $350. Some lenders also charge a loan establishment fee up to $1,000, though many waive the application fee for first home buyers.
Can I avoid paying Lenders Mortgage Insurance as a first home buyer?
Yes, if you use the Australian Government 5% Deposit Scheme, no LMI is payable because the government guarantees the difference between your deposit and 20%. If you're not using the scheme and have a deposit under 20%, LMI will apply and can range from $5,000 to over $20,000.
How much do monthly account fees cost over the life of a loan?
Most variable rate loans charge between $10 and $15 per month, which adds up to $3,600 to $5,400 over 30 years. Some lenders include features like offset accounts at no extra cost, while others charge an additional $5 to $10 per month per feature.
Do I have to pay for mortgage protection insurance?
No, mortgage protection insurance is optional. It covers your loan repayments if you lose income due to illness, injury, or redundancy, but you can arrange income protection insurance independently, which often offers broader cover and more competitive premiums.
What settlement and discharge fees will I pay in South Australia?
Settlement fees are usually between $150 and $350 and are paid when your loan is finalised. Discharge fees apply when you pay off or refinance the loan and typically range from $300 to $500. Both are one-off costs paid to the lender.
