Fixed rate loans come with a different fee structure to variable loans, and those differences matter when you're comparing products.
The main cost categories are application fees, ongoing account fees, and break costs if you exit early. Each lender structures these differently, and the total cost over the life of your loan depends on which product you choose and how long you hold it.
Application and establishment fees on fixed rate products
Most lenders charge an application fee between $0 and $900 when you take out a fixed rate loan. This fee covers the cost of processing your application and establishing the loan. Some lenders waive this fee entirely, while others charge it regardless of loan size.
Settlement fees typically add another $150 to $300. These cover the administrative work involved in releasing funds to the seller or their legal representative. Unlike application fees, settlement fees are almost always charged and appear on your settlement statement.
Consider a data engineer refinancing an owner occupied home loan of $600,000 from a variable rate to a fixed rate product. One lender charges a $600 application fee plus $200 settlement fee, while another charges no application fee but has a $350 settlement fee. The first option costs $800 upfront, the second costs $350. Over a three-year fixed period, that $450 difference is relatively small, but it still affects your initial cash requirement at settlement.
Ongoing account fees during the fixed period
Fixed rate loans usually charge a monthly account fee between $0 and $15. Over a three-year fixed term, that's up to $540 in total fees. Some lenders bundle this into their annual package fee, others charge it separately.
Package fees range from $300 to $400 per year and often include other benefits like fee waivers on transaction accounts or credit cards. Whether a package fee makes sense depends on whether you'll use those additional features. If you're only after the home loan, a product with no package fee and a low monthly account fee typically costs less overall.
Fixed rate products often have fewer features than variable loans. Most don't include an offset account, and if they do, the offset functionality may be limited or come with a higher interest rate. Some fixed rate loans allow extra repayments up to a certain limit, usually $10,000 to $30,000 per year, without penalty. Others lock you into the exact contracted repayment amount.
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Break costs and how they're calculated
Break costs apply when you repay a fixed rate loan before the fixed period ends. This includes refinancing, selling the property, or making extra repayments beyond the allowed limit.
Lenders calculate break costs based on the difference between your fixed interest rate and the current wholesale interest rate for the remaining fixed period. If rates have fallen since you fixed, you'll likely pay a break cost. If rates have risen, the break cost may be zero or close to it.
The calculation uses the remaining loan balance, the remaining time on your fixed term, and the difference between your rate and the rate the lender can now lend at. A data engineer who fixed at 5.5% for five years and wants to refinance after two years would face a break cost if the lender's current three-year wholesale rate is 4.8%. The lender is losing the difference between what you agreed to pay and what they can now earn on that money.
Break costs can range from a few hundred dollars to tens of thousands, depending on how much rates have moved and how much time remains on your fixed term. Lenders are required to provide an estimate if you ask, and the final figure is calculated at the time you discharge the loan. If you're considering refinancing your home loan, getting a break cost estimate is the first step.
Discharge fees when you exit the loan
Discharge fees cover the administrative cost of closing your loan and removing the lender's mortgage from the property title. These typically range from $150 to $400 and apply whether you're refinancing, selling, or paying out the loan in full.
Some lenders charge a government fee separately, usually around $100 to $150, which covers the cost of lodging discharge documents with the state land titles office. This is a pass-through cost, not a lender profit margin, but it still adds to your total exit cost.
If you're selling and settling on the same day you discharge your fixed rate loan, you'll pay both the discharge fee and any applicable break cost. These come out of your sale proceeds at settlement, so they reduce the amount you receive rather than requiring upfront payment.
Fixed rate fees compared to variable rate fees
Variable rate loans generally have similar application and settlement fees but lower ongoing costs. Monthly account fees are often lower or waived, and most variable products include an offset account at no extra charge. The trade-off is that your home loan interest rate can move at any time.
Fixed rate loans cost more to exit early but provide certainty during the fixed period. Variable loans give you flexibility to refinance or repay without penalty but expose you to rate movements. A split loan structure lets you combine both, fixing part of your loan for certainty while keeping part variable for flexibility and offset functionality.
The total cost over five years depends on whether you hold the loan for the full term. If you refinance or sell within two years, a variable loan usually costs less due to the absence of break costs. If you hold the loan for the full fixed term, the total fees are often similar, and the rate you locked in determines whether you saved money overall.
Valuation and legal fees outside the loan itself
Lenders usually require a property valuation before approving your application. Some lenders cover this cost, others charge between $200 and $400. The valuation fee is separate from the loan establishment fee and is payable regardless of whether your application is approved.
Legal fees for conveyancing or settlement typically range from $1,200 to $2,500 depending on your state and the complexity of the transaction. These aren't charged by the lender but are a necessary cost of settling your loan. If you're purchasing a property, you'll also pay stamp duty to the state government, which varies by state and property value.
Lenders Mortgage Insurance is another potential cost if your deposit is below 20%. LMI premiums range from a few thousand dollars to over $30,000 depending on your loan amount and deposit size. Some lenders offer LMI waivers for tech industry workers, which can save a significant amount on properties up to certain value thresholds.
Fixed rate products and variable rate products typically have the same LMI premiums for the same loan-to-value ratio. The loan type doesn't affect the insurance cost, but it does affect whether you can refinance later without triggering break costs.
The total upfront cost to settle a fixed rate loan includes application fees, settlement fees, valuation fees, legal fees, and potentially LMI. Knowing these in advance lets you plan your cash requirement accurately, rather than discovering additional costs a week before settlement.
Call one of our team or book an appointment at a time that works for you to review the full fee structure across lenders and identify which product gives you the features you need at the lowest total cost over your intended holding period.
Frequently Asked Questions
What are the typical upfront fees for a fixed rate home loan?
Most lenders charge an application fee between $0 and $900, plus a settlement fee of $150 to $300. Some lenders waive the application fee entirely, while settlement fees are almost always charged.
How are break costs calculated on a fixed rate loan?
Break costs are based on the difference between your fixed interest rate and the lender's current wholesale rate for the remaining fixed period. If rates have fallen since you fixed, you'll typically pay a break cost, but if rates have risen, the cost may be zero.
Do fixed rate loans have monthly account fees?
Most fixed rate loans charge a monthly account fee between $0 and $15, which totals up to $540 over a three-year fixed term. Some lenders bundle this into an annual package fee instead.
What fees apply when I exit a fixed rate loan early?
You'll pay a discharge fee of $150 to $400, plus any applicable break costs if you're exiting before the fixed period ends. Government fees of around $100 to $150 may also apply for lodging discharge documents.
Are fixed rate loan fees higher than variable rate loan fees?
Application and settlement fees are usually similar, but fixed rate loans often have higher ongoing costs and exit penalties. The main difference is the break cost, which applies to fixed rate loans if you exit early when rates have fallen.
