Variable Rate Loan Fees and Costs to Watch For

Variable rate loans don't charge break fees when you refinance or pay ahead, but they come with their own set of costs.

Some of these hit at settlement. Others drip out monthly or pop up when you make changes to your loan. We regularly see officers who've compared rates but missed the fees that wipe out the savings. The difference between a competitive loan and an expensive one often sits in the fine print.

Application Fees That Should Be Negotiable

Most lenders charge an application or establishment fee to set up your loan. This typically runs between $200 and $600, though some lenders waive it during promotional periods or for certain occupations. If you're applying through a broker, the lender pays the broker's commission separately, so this fee covers the lender's internal processing costs.

Consider an officer applying for an owner occupied variable rate loan with a lender charging a $600 application fee. If that same lender offers a police-specific package with LMI waiver benefits, the establishment fee is often reduced or removed as part of the package. It's worth asking directly whether your occupation qualifies for a fee discount before you sign anything.

Ongoing Monthly Account Fees

Some variable rate loans charge a monthly account keeping fee, usually between $10 and $15. Over a 30-year loan, that's $3,600 to $5,400 in fees that don't reduce your principal or improve your loan in any measurable way. Other lenders don't charge this fee at all, particularly on their professional packages.

In our experience, officers on shift work appreciate knowing exactly what leaves their account each month. If you're choosing between two loans with similar rates, the one without a monthly fee gives you more predictable repayments and less to track across your rostered pay cycles. You can often find variable rate loans with offset accounts and no monthly fees if you're borrowing above a certain threshold, typically around $250,000.

Offset Account Fees and Conditions

An offset account linked to your variable rate loan can reduce the interest you're charged without locking you into a fixed term. Some lenders include one offset account at no cost. Others charge between $10 and $20 per month, or limit the number of linked accounts unless you pay extra.

If you're carrying a balance in your offset most of the time, even a $15 monthly fee is usually worth it. But if your offset sits empty because your pay goes straight to expenses, you're paying for a feature you're not using. Check whether the loan allows you to remove the offset later without refinancing, particularly if your financial situation changes or you move from owner occupied to investment loans.

Valuation and Settlement Costs

The lender will arrange a valuation before approving your loan, and most pass this cost to you. Valuation fees depend on the property type and location, typically ranging from $200 to $400 for a standard residential property. Some lenders cover this cost as part of their professional packages, so it's worth confirming upfront.

Settlement fees, also called documentation or discharge fees, are charged by the lender to prepare and register the mortgage documents. These usually sit between $200 and $400. You'll also need to pay for legal or conveyancing services separately, which aren't part of the loan product but are required to complete the purchase. If you're refinancing, your existing lender may charge a discharge fee to release the mortgage, typically around $300 to $400, and this sits outside the control of your new lender.

Redraw Fees and Payment Flexibility

Variable rate loans generally let you pay more than the minimum repayment, and most allow you to redraw those extra funds if you need them later. Some lenders charge a fee each time you redraw, often between $10 and $50 per transaction. Others offer unlimited free redraws through online banking.

If you're planning to pay ahead when you can and pull funds back during quieter months, a loan with unlimited free redraws gives you more control without penalty. This flexibility suits officers with variable income from overtime or allowances, where your pay fluctuates depending on your roster. Make sure the redraw facility is accessible online rather than requiring a phone call or branch visit, particularly if you're working night shifts or irregular hours.

Switching Between Variable and Fixed Rates

Some lenders let you convert part or all of your variable rate loan to a fixed rate without refinancing. This is different from a split loan structure, where you set up both portions at the start. The conversion usually attracts a fee, often between $300 and $500, and you'll be locked into whatever fixed rate the lender is offering at that time, which may not be their most competitive rate.

If you're considering this option, compare the conversion fee and the fixed rate you'd receive against the cost of refinancing to a different lender with a lower fixed rate. In most cases, refinancing gives you access to better rates and potentially better loan features, particularly if you're also looking to consolidate debt or access equity. If you're unsure whether a fixed or variable rate suits your situation, getting loan pre-approval with a split structure gives you both options from the start.

Package Fees and Annual Costs

Some lenders bundle their variable rate loans into a package that includes fee waivers, rate discounts, and extras like free credit cards or transaction accounts. These packages often charge an annual fee, typically between $300 and $400. Whether the package saves you money depends on how many of the included features you'll actually use.

If the package waives your monthly account fee, includes a free offset account, and gives you a 0.10% rate discount, the annual fee usually pays for itself. But if you're only using the home loan and none of the extras, you might be better off with a standalone variable rate loan that doesn't charge a package fee. Check what happens if you cancel the package midway through the year, some lenders refund the unused portion, others don't.

Costs You Can Push Back On

Not every fee is set in stone. Application fees, package fees, and offset account fees are often negotiable, particularly if you're borrowing a larger amount or you qualify for a professional package. Lenders compete for police officers because of stable employment and lower default risk, so it's worth asking your broker to push for fee waivers or reductions before you sign.

Valuation and settlement fees are harder to negotiate because they're tied to third-party services, but some lenders absorb these costs during promotional periods. If you're refinancing, ask whether the new lender will cover your discharge fee from your existing lender. Some will, particularly if you're bringing across a loan balance above $400,000.

Call one of our team or book an appointment at a time that works for you. We'll walk you through the actual costs on the loans you're comparing and let you know which fees can be reduced or removed based on your occupation and loan amount.

Frequently Asked Questions