Fixed rate home loans charge fees beyond the interest rate itself.
Most lenders apply an upfront application fee, ongoing account fees, and break costs if you exit early. Some lenders also charge valuation fees and settlement fees separately. The total cost structure varies between lenders, and knowing what you'll pay before you lock in a rate helps you compare fixed rate products properly.
Upfront Application Fees on Fixed Rate Loans
Application fees typically range from zero to around $600, depending on the lender. Some lenders waive the application fee entirely, while others charge it regardless of loan size or loan type. This fee covers the lender's cost of processing your application, running credit checks, and assessing your financial position.
In our experience, Victorian Police officers using certain lender programs can access lower or waived application fees. When comparing fixed rate options, check whether the application fee is refundable if your loan doesn't settle. Some lenders retain the fee even if the application is withdrawn or declined.
Valuation and Settlement Fees
Valuation fees are charged when the lender arranges a registered valuer to assess the property you're purchasing or refinancing. The fee usually sits between $200 and $400, depending on the property type and location. Some lenders absorb this cost as part of a promotional package, while others pass it directly to you.
Settlement fees cover the administrative work involved in finalising your loan. This fee is typically between $150 and $300 and is charged at settlement. A small number of lenders bundle settlement fees into their loan packages without charging them separately, but most apply them as a line item on your settlement statement.
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Ongoing Monthly or Annual Account Fees
Many fixed rate home loans charge an ongoing account fee, either monthly or annually. Monthly fees usually range from $10 to $15, while annual fees might sit between $200 and $395. This fee is separate from your interest repayments and covers the lender's administration of your account.
Some fixed rate products don't charge ongoing account fees at all. When you're choosing between two fixed interest rate options with similar rates, the ongoing fee can make a material difference over the fixed term. A loan with a $15 monthly fee adds $900 over a five-year fixed term.
Fixed Rate Break Costs: How the Calculation Works
Break costs apply when you exit a fixed rate loan before the end of the fixed term. This includes selling the property, refinancing to another lender, or switching to a variable rate with the same lender. The break cost is calculated based on the difference between the rate you locked in and the lender's current wholesale funding cost for the remaining fixed period.
Consider a scenario where you fixed at 5.5% for five years, but two years in you need to sell. If the lender's current wholesale rate for a three-year term is 4.8%, you'll be charged a break cost that reflects the lender's loss on the interest they expected to earn. The calculation also factors in your remaining loan balance and the time left on the fixed term. Break costs can range from a few hundred dollars to tens of thousands, depending on how much rates have moved.
Most lenders provide a break cost estimate before you commit to exiting the loan. This estimate should be requested in writing so you can weigh the cost of breaking against the benefit of selling or refinancing. Victorian Police officers working unpredictable rosters or considering transfers should factor break costs into the decision to fix, particularly for longer terms.
Discharge Fees When You Sell or Refinance
Discharge fees are charged when you pay out your loan in full, either because you've sold the property or refinanced to another lender. This fee typically sits between $150 and $400 and covers the lender's administrative cost of removing the mortgage from the property title.
Discharge fees apply to both fixed and variable rate loans, but they're particularly relevant for fixed rate loans because they're charged in addition to any break costs. If you're refinancing a fixed rate loan before the fixed term ends, you'll pay both the discharge fee and the break cost at settlement.
Extra Repayment Limits and Penalty Fees
Most fixed rate loans allow you to make extra repayments up to a certain limit each year without penalty, usually between $10,000 and $30,000 depending on the lender. If you exceed that limit, the lender may charge a fee or include the excess in a break cost calculation.
Some lenders don't allow any extra repayments during the fixed term, while others permit unlimited extras without penalty. If you're expecting to receive annual bonuses, overtime payments, or other irregular income and want to pay down your loan faster, check the extra repayment terms before locking in a fixed rate. A loan with a $30,000 annual extra repayment allowance gives you more flexibility than one with a $10,000 cap.
Offset Account Availability and Fees
Most fixed rate home loans don't offer a linked offset account. A small number of lenders do provide offset accounts on fixed rate products, but they often charge a higher interest rate or an additional monthly fee for the feature. If maintaining an offset account is important to you, compare the cost of adding it to a fixed rate loan against the benefit of keeping your funds in the offset.
Variable rate home loans almost always include offset accounts without additional fees. If you're considering a split loan structure, you can attach an offset account to the variable portion while keeping the fixed portion at a lower rate without the offset feature. This approach preserves flexibility without paying for an offset you may not fully use on the fixed portion.
Package Fees for Bundled Fixed Rate Products
Some lenders offer fixed rate loans as part of a package that includes fee waivers, rate discounts, or linked transaction accounts and credit cards. Package fees typically range from $300 to $400 per year. The package may waive ongoing account fees, valuation fees, or settlement fees, but you need to add up the total saving to confirm the package fee is worthwhile.
In a scenario where the package waives a $395 annual account fee, a $250 valuation fee, and a $200 settlement fee, you're ahead by around $450 in the first year after paying a $395 package fee. In subsequent years, the saving drops to the waived account fee alone. Packages work if you're using multiple products with the same lender, but for a standalone fixed rate home loan, the value is often marginal.
Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structure for each fixed rate option, calculate the total cost over the fixed term, and make sure you're not paying for features you won't use. Whether you're locking in your first home loan or refinancing an existing loan, we'll find a fixed rate product that fits your roster and your circumstances.
Frequently Asked Questions
What are break costs on a fixed rate home loan?
Break costs are charged when you exit a fixed rate loan before the fixed term ends, whether by selling, refinancing, or switching to a variable rate. The cost is calculated based on the difference between your locked rate and the lender's current wholesale funding cost for the remaining fixed period.
Do all fixed rate home loans charge ongoing account fees?
No, some fixed rate loans don't charge ongoing account fees at all. Others charge monthly fees between $10 and $15 or annual fees between $200 and $395, depending on the lender and product.
Can I make extra repayments on a fixed rate loan without penalty?
Most fixed rate loans allow extra repayments up to a set limit each year, usually between $10,000 and $30,000, without penalty. Exceeding that limit may result in a fee or be treated as part of a break cost calculation.
Are discharge fees separate from break costs?
Yes, discharge fees are charged when you pay out your loan in full and typically range from $150 to $400. If you're exiting a fixed rate loan early, you'll pay both the discharge fee and any applicable break costs.
Do fixed rate home loans come with offset accounts?
Most fixed rate loans don't offer offset accounts. A small number of lenders provide them on fixed rate products, but often at a higher interest rate or with an additional monthly fee.
