4 min read | 16 May 2019
Most of the time we buy stuff, we pay for it, and it’s ‘job done’. Yet when we apply for a home loan, fees can pop up everywhere! But it’s not something you should have to cop or pay for.
Odds are if you look at your current home loan statement for the last year, you’ll have been hit with some kind of fee. And it’s likely that you also got charged some when you applied for your loan.
Our home loan interest rates are at historic lows, but sadly that doesn’t matter at all when it comes to fees and charges. If you already have a home loan, it might be worth doing a quick health check to see what you are being hit with, and if it's a fee you don’t get value from, then it might be time to find a better product.
For example, did you know you often pay for someone to assess your application? As if that’s not bad enough, you might end up paying it back with interest if you add the fee to your loan – and over the years that interest adds up big time!
A home loan application fee is a once-off fee paid to your bank or lender for setting up your home loan. It can be called other things as well such as an application fee, an establishment fee, up-front fees, start-up fees, or set-up fees. Sometimes lenders claim to have no establishment fees, but make sure you check that their rates or ongoing fees aren’t higher than average to compensate.
Package fees are charged for the ongoing maintenance of your account or extra features. Also called home loan ongoing fees, these are usually charged monthly or annually for the life of your loan. These fees are often associated with an extra feature, or traded off for a lower rate so make sure if you are getting charged these that you’re happy with what you get for them. Not getting anything? Then reconsider fast.
That could include if you have credit cards attached to your home loan, or if you have a redraw or offset facility. Sometimes your lender has sold you an offset facility (for an extra package fee, or higher loan interest rate) when a redraw (typically free) may do the job just as well depending on your needs.
It’s a good idea to work out the features you need in your home loan facility, and assess the value they deliver you, against any costs they incur!
But the fees don’t end there. When you finally (finally) pay off your home loan, there’s no champagne congratulations from the bank. Oh no, you may be stung with discharge fees, which is disheartening if you’ve done a great job and paid the loan down early.
Not paid down your loan but found a better deal elsewhere? Take care to look out for exit fees, which although illegal as a category of fees for any loan taken out after 2011, can still be charged for any reasonable losses incurred by the lender. And overall, exit fees can’t be used to discourage consumers from switching from one lender to another, or as a means of punishing them for doing so. Fixed loans in particular are almost guaranteed to have a break fee applied. Sometimes the savings you’ll make from switching will compensate, sometimes they won’t. Use online switching calculators to help work it out.
And if you want to change or vary your mortgage, then “Ker-Ching”, your lender hits you again. A variation of mortgage could include changes to your rate of interest, an increase to the mortgage debt, shortening or lengthening the life of your loan, or varying/omitting/adding conditions contained within the mortgage document.
We also put our money where our mouth is, and don’t charge any fees. Not only do we not charge fees, we actively encourage you to pay your loan off sooner. We also won’t let you languish on a more expensive rate and give new customers all the good stuff. We will drop your rate on a like-for-like loan to match any rate we offer new customers.
Take some easy steps to check if you are suffering from hidden fees, and then move to a lender with a great interest in you!