Home loans with no upfront and ongoing fees

author-avatar By on March 17, 2021
Home loans with no upfront and ongoing fees

While interest usually represents the biggest expense of your home loan, the upfront and ongoing fees can add up to deliver quite the powerful sting to your hip-pocket.

In this article, we’ll explore what these charges are, how much they can cost, and whether you should avoid them or not.

On this page:

Compare home loans with $0 upfront fees

Owner-occupied home loans with $0 upfront fees

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

Investment home loans with $0 upfront fees

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

Compare home loans with $0 ongoing fees

Owner-occupied home loans with $0 ongoing fees

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

Investment home loans with $0 ongoing fees

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

What do home loan upfront fees cost? 

Upfront fees are the fees you pay when you first sign up to a mortgage and can encompass many things like conveyancing fees, stamp duty, title fees, valuation fees (see below) and Lenders Mortgage Insurance (LMI). But some of these are separate to what the lender will charge. The main upfront fee we’ll be talking about is the application fee, also known as an establishment fee or a start-up fee.

The application upfront fee is a one-time fee charged at the beginning of your mortgage and pays for the approval and documentation of the loan, as well as the cost of processing it. This can often be necessary when a lending specialist talks you through the process and completes your application, as the lender will have to pay for that person’s salary and other banking costs to bring you on as a customer. As one of the more common mortgage fees, application fees can often be waived.

An analysis of a large number of home loan products - fixed and variable - shows almost exactly half (50.26%) charge an application fee. The average application or upfront fee is about $250, and the highest can be around $800 to $1,000. Of course, this also means around half of standard home loans don’t charge any application fees, and you can see a handful of some low-rate examples in the following tables.

See also: Home loans with $0 valuation fees

What do home loan ongoing fees cost? 

Ongoing fees, as opposed to upfront fees, are charges on your home loan that are continuous. The two main types of ongoing mortgage fees are monthly fees and annual fees, of which lenders tend to charge one or the other. This is to pay for the operational costs of managing your home loan, and can also be charged as a package fee for mortgages bundled with other banking products.

Generally speaking, common monthly fees sit at around $5 to $15 each month, which is between $60 and $180 per year. Many lenders offer deals where they wave these ongoing fees for the first year or so to entice new customers.

Based on that same group of home loans before, Savings.com.au found that just under 73% of home loans actually don’t charge any annualised ongoing fees at all. So just over a quarter of them do charge such a fee, and the average across the market sits at around $35. The highest meanwhile could set you back as much as $400 per year, which is almost that average fee in any given month!

So these ongoing fees can actually cost more than an upfront fee as they’re continuously charged, but you might not know it as they appear smaller at a glance. If those figures seem too high to you, then take a look at some home loans below for investors and owner-occupiers that don’t charge any ongoing monthly or annual fees.

How much of a difference can these fees make?

These fees can make a noticeable difference to how much you repay on your home loan overall, as they can really add up over time. Let’s compare two home loans, both of which have:

  • A 3.00% p.a. interest rate
  • A 30-year term
  • A $400,000 loan amount
  • Monthly principal and interest repayments

But one of these loans has a $200 upfront fee and an annual fee of $150. The other loan charges no fee. Now these loans would have a total cost of $607,709 if both had no fees, but that second loan costs a bit extra. About $4,000 extra in fact, with those charges bringing it to a total cost of $611,808.80

So by picking the loan with no upfront or ongoing fees, you’ve saved about $4,000 off your mortgage costs in this example. Pretty good, right?

Should you get a home loan with no upfront or ongoing fees?

What you really need to consider on a home loan is how much the interest rate will save you, as well as any useful features like an offset account that can be helpful for saving lots of money. While $4,000 in savings sounds quite good, that’s small-fry compared to the savings you can make by getting a lower interest rate:

Loan amount

2.50% interest rate monthly repayments

3.50% interest rate monthly repayments

Monthly savings at 2.50%

Total savings at 2.50%

$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

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

An interest rate difference of 1.00% p.a could lead to tens of thousands of dollars in savings. That’s much more than the few thousand you’ll save by avoiding fees, and that’s what will really make the difference. Although as we’ll explain below, saving a few thousand in fees isn’t worth scoffing at either.

To work out what you can save with different interest rates and fees, use Savings.com.au’s mortgage comparison calculator.

Other home loan costs to be aware of

Savings.com.au has an extensive breakdown of each of the common and not-so-common mortgage fees and charges, while you can also consult the following articles for more information on the big costs to factor in when buying property:

Savings.com.au’s two cents

While it is the interest rate that’ll make the biggest difference (besides maybe how much you borrow), that doesn’t mean you shouldn’t also try to get a home loan with low or no fees. Ideally, you should look for one that has a combination of:

  • A low interest rate
  • Low/no fees
  • And useful, flexible features you could take advantage of

When it comes to upfront and ongoing home loan fees, around half or more products on the market don’t charge them, so why would you pay hundreds just to apply for a home loan, or to merely continue using it each year? That’s a few thousand dollars all up that isn’t mandatory, so avoid it if you can.

To find out exactly how much a loan might charge for certain fees (there are more fees than just the two we’ve mentioned here), check the PDS (product disclosure statement) to get a full breakdown of all its fees before you apply, and consider the comparison rate on the loan as well.


Sandy Millar 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): Credit Union Australia, 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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