Home loans with no settlement fees

author-avatar By on February 26, 2021
Home loans with no settlement fees

Want to refinance to a different loan, or fancy paying your loan off early? Be wary of any settlement fees your lender charges…

We’ll go through what a settlement fee is, and how much they can cost on a standard home loan.

On this page: 

Owner-occupier home loans with no settlement fee

The table below displays a handful of owner-occupier (OO) home loans with a $0 settlement fee, sorted by interest rate (ascending).

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
FREE REDRAW FACILITY

Basic Home Loan (Principal and Interest) (LVR 70%-80%)

FREE REDRAW FACILITY
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*
  • Lower your rate the more you pay off your loan
  • Automatic rate match
  • No on-going fees
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*
VariableMore details
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

NO UPFRONT OR ONGOING FEES

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of October 23, 2021. View disclaimer.

Investor home loans with no settlement fee

The table below displays a handful of investment home loans with a $0 settlement fee, sorted by interest rate (ascending).

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • The more you pay down your loan, the more we’ll lower your rate
  • Athena charges zero fees
VariableMore details
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Investment) (LVR < 80%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Unlimited extra repayments
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Investment) (LVR < 80%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Unlimited extra repayments
VariableMore details

Straightforward Investment Loan (Principal and Interest) ($150k-$500k)

VariableMore details

Variable Investment Loan Package Special (Principal and Interest)

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of October 23, 2021. View disclaimer.

What is a mortgage settlement fee?

A home loan settlement fee, also known as an early termination fee, is a one-off fee paid if you happen to pay out your home loan before the set term has expired. This usually only applies in the first five years or so, which makes it more common when people refinance: the lender will have likely budgeted for a full loan term, and you leaving is an inconvenience to their loan book. The settlement fee is designed to cover the legal costs and any other costs of this early termination to the lender.

Settlement fees are not to be confused with the following:

  • Break fees: Applying mainly to fixed-rate loans, break fees are fees you have to pay for leaving the loan during that fixed period. As we explain here, these break fees can add thousands of dollars to the cost of your loan, so be very careful with these.

  • Early exit fees: banned on any loan contract signed after July 2011, exit fees used to be charged to customers simply for leaving the loan at any point, and were as high as $7,000 in some cases! Some might still charge this if you have an old loan, to double-check your T’s and C’s.

  • Discharge fees: These are similar to application fees, as they are a one-off fee charged at the conclusion of the loan term when you’ve paid in full. They’re intended to cover the administration costs of ending the loan agreement.

How much do settlement fees usually cost?

Just over a third of lenders happen to charge a settlement fee (35.3%), based on a review of several hundred loan products by Savings.com.au (using base assumptions of: owner occupier, variable rate, principal and interest, $400,000 loan amount). So about two-thirds of them charge $0 - not a bad ratio at all.

For those that do charge one, the average settlement fee on these home loans is about $211 ($75 across all loans compared). You’re more likely to find settlement fees in the $100-$400 range, while the big four banks currently can charge the following (as at February 2021):

  • ANZ settlement fee: Up to $160

  • CBA settlement fee: Up to $200

  • NAB settlement fee: Up to $350

  • Westpac settlement fee: Up to $350

These charges depend on the type of loan, and various other factors like the length of time left in the loan term.

Unlike settlement fees, discharge fees are more expensive and more common, costing almost $300 on average and being charged by 93% of all lenders examined. They can also cost up to $1,000 in some cases.

Why would you finish a home loan early?

Repaying your home loan before the end of the set loan term is generally a very beneficial thing to do, even if you have to pay a few hundred dollars to do so. Why? Because you could save far more in interest costs thanks to the reduced timeframe of the loan….

Can you save by exiting a loan early?

Home loan interest is generally charged on any amount left owing on the loan. If you borrowed $500,000 on a 30-year loan term, and have an unchanging 2.50% p.a. interest rate, then you’ll be charged 2.50% per annum as the loan principal slowly gets paid off. On each repayment, some of it will go towards paying interest.

This can obviously be very expensive. A $500,000 loan for 30 years on an interest rate of 2.50% p.a (principal and interest repayments), would cost $711,818 all up over that time. But over 25 years, it would cost $673,500 - nearly $40,000 less. This is because the interest charged in the first loan is being spread out over a longer time. The longer the loan, the more expensive it’s likely to be.

Use Savings.com.au’s home loan comparison calculator to see how this works.

This is why paying your home loan off early by regularly making extra contributions or lump sum repayments can save you thousands, far outweighing any settlement or discharge costs.

Can you dispute a settlement fee?

The law states that the lender cannot charge more than what you leaving is costing them as a business, so if you think what you’re being charged is too much, then by all means lodge a complaint with the lender. If you’ve switched to a new lender, then try asking them to see if they’ll cover it for you, or if they’ll waive any fees of their own in exchange.

Other home loan fees to consider

There's a multitude of home loan fees you can be charged, and we’ve only covered a few of them. Other common fees include:

And many more, like missed payment fees.

Savings.com.au’s two cents

The key takeaway for minor home loan fees like settlement fees is that they can be a one-time annoyance, but you need to look at the big picture. A $200 fee or so when you pay off your loan early won’t make nearly as much of a difference as the interest rate will. You can see this difference in the table below.

Loan amount

2.50%

3.50%

Monthly savings at 2.50%

Total savings at 3.50%

$300,000

$1,185.36

$1,347.13

$161.77

$58,238.52

$400,000

$1,580.48

$1,796.18

$215.7

$77,649.22

$500,000

$1,975.60

$2,245.22

$269.62

$97,062.85

$700,000

$2,765.85

$3,143.31

$377.46

$135,889.13

Calculations made via Savings.com.au's Home Loan Comparison Calculator, based on a 30-year mortgage with variable, P&I repayments.

If you’re saving more than $100,000 thanks to prudently choosing a home loan with a low interest rate, will a few hundred dollars matter? And given roughly two-thirds of home loans don’t charge settlement fees, there’s a good chance you can get both a good rate and no settlement fee.

Make the interest rate your priority, and worry about smaller fees later.


Photo by DocuSign on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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