Avoid These Variable Rate Loan Fee Mistakes

The Fee Categories That Apply to Variable Rate Home Loans

Variable rate home loan arrangements attract several distinct fee categories. Lender application and settlement fees apply directly to the loan facility. Government conveyance duty and registration fees apply to the transfer of title. Lenders mortgage insurance applies where the deposit is less than 20% of the property value. Legal and conveyance costs are incurred separately. Each category operates under different terms and is paid to different entities at different stages of the transaction.

Application fees charged by lenders typically range from $250 to $600 depending on the institution and the product tier. Settlement fees, also known as establishment fees, may be charged separately or combined with the application fee. These fees are generally payable at the time the loan is drawn down. Not all lenders impose application or settlement fees. A minority of lenders advertise nil application fee products but may recover equivalent costs through higher ongoing interest margins or through alternative fee structures such as annual package fees.

Valuation fees are charged when a lender commissions a property valuation report. The cost is usually between $200 and $400 depending on the property type and location. Some lenders absorb this cost internally. Others pass it to the borrower and collect payment either before settlement or at settlement. The valuation fee is separate from any building and pest inspection arranged by the buyer. The valuation is conducted for the benefit of the lender to confirm the security adequacy, not for the benefit of the buyer to identify defects.

Conveyance Duty and ACT Revenue Office Charges

Conveyance duty in the Australian Capital Territory is calculated according to the dutiable value of the property and the buyer's eligibility for concessions. From 1 July 2026, eligible first home buyers are fully exempt from conveyance duty regardless of the property value or household income under the Home Buyer Concession Scheme. The property value limit and income threshold that applied to transactions before 1 July 2026 have both been removed. Eligibility requires that the buyer is an individual aged 18 or over, has no relevant prior property interest, and occupies the property as their principal place of residence continuously for a minimum of one year commencing within 12 months of settlement.

Title registration fees are payable to the ACT Revenue Office at the time the transfer is lodged. These fees are distinct from conveyance duty and apply regardless of whether a duty exemption is claimed. Registration fees are calculated on a sliding scale according to the consideration for the transfer. For transfers with consideration exceeding $500,000, the registration fee is approximately $1,700 to $1,900. Buyers should verify the current fee schedule with the ACT Revenue Office or their legal representative.

Off-the-plan unit purchases attract specific treatment. From 1 July 2026, no duty applies to off-the-plan unit owner occupier purchases with no property value threshold. The exemption applies to unit-titled properties such as apartments and townhouses where the buyer is an individual and occupies the property as their principal place of residence continuously for at least one year commencing within 12 months of completion. The exemption is not limited to first home buyers but applies to all owner occupiers who meet the occupancy requirement.

Lenders Mortgage Insurance Premiums and Calculation Methodology

Lenders mortgage insurance is a risk premium charged to the borrower to indemnify the lender against loss in the event of default where the loan to value ratio exceeds 80%. The premium is calculated as a percentage of the loan amount and varies according to the loan to value ratio and the size of the loan. A loan to value ratio of 85% attracts a lower premium than a loan to value ratio of 95%. The premium is a single upfront payment and does not recur annually.

Premiums are typically calculated as a percentage of the loan amount rather than the property value. Consider a scenario where a buyer purchases a unit in Braddon and borrows 90% of the property value. The lenders mortgage insurance premium may be calculated at approximately 1.5% to 2.5% of the loan amount depending on the lender and the insurer. The premium may be capitalised into the loan balance rather than paid in cash at settlement, which increases the total amount borrowed and the interest payable over the life of the loan.

Eligible first home buyers using the Australian Government 5% Deposit Scheme avoid paying lenders mortgage insurance entirely. The scheme, operative from 1 October 2025, permits eligible buyers to purchase with a 5% deposit without incurring lenders mortgage insurance. Housing Australia guarantees the difference between the deposit and 20% of the property value. No income caps apply and no annual place limits apply. Applications are made through a participating lender panel of 31 lenders comprising three major banks and 28 non-major lenders. Property price caps apply. In the Australian Capital Territory, the cap is aligned with the regional classification under the scheme. Buyers considering low deposit options should evaluate whether the scheme is available through their chosen lender and whether the property meets the price cap criteria.

Legal and Conveyancing Fees Specific to Variable Rate Transactions

Legal and conveyancing fees are payable to the solicitor or licensed conveyancer who manages the transfer of title and the settlement process. Fees vary depending on the complexity of the transaction and the professional engaged. Standard conveyancing for the purchase of an established residential property in the ACT typically costs between $1,200 and $2,500 excluding disbursements. Disbursements include search fees, certificate fees, and bank charges.

Variable rate loan arrangements do not inherently attract higher legal fees than fixed rate arrangements. The work performed by the conveyancer is primarily related to the transfer of title and the registration of the mortgage, neither of which differs materially based on whether the interest rate is variable or fixed. However, certain lenders impose additional documentation requirements or require supplementary security registrations that may increase conveyancing time and therefore cost. Buyers should confirm the scope of legal fees with their conveyancer before engaging the service and should request a written fee estimate that separates professional fees from disbursements.

Settlement scheduling can affect cost in jurisdictions where settlement booking fees vary by date or where delay penalties apply. In the ACT, settlement is typically conducted electronically through the Property Exchange Australia settlement platform. Electronic settlement fees are included in the conveyancer's disbursements. Manual settlements are rare and attract higher costs.

Ongoing Account Fees and Optional Facility Charges

Variable rate home loan products may include ongoing account fees such as monthly account keeping fees or annual package fees. Account keeping fees range from nil to approximately $15 per month depending on the lender and the product. Some lenders waive account keeping fees where the loan balance exceeds a specified threshold or where the borrower holds additional products with the institution.

Annual package fees apply where the borrower selects a packaged product that bundles the home loan with offset accounts, fee waivers, and discounted rates on other facilities. Package fees typically range from $300 to $400 per year. The value of a packaged product depends on whether the borrower utilises the included features. A borrower who does not require an offset account or additional credit facilities may find that a standard variable rate product without a package fee delivers lower total costs.

Optional facility charges include redraw fees, additional repayment processing fees, and fees for increasing the loan limit or switching the loan structure. Redraw fees apply when a borrower withdraws surplus funds from the loan account after making repayments above the scheduled minimum. Not all lenders impose redraw fees. Those that do typically charge between $20 and $50 per redraw transaction. Buyers who anticipate making irregular lump sum repayments and later accessing those funds should confirm whether redraw is available and whether fees apply. Offset accounts provide an alternative structure that avoids redraw fees entirely by maintaining surplus funds in a separate transaction account linked to the loan.

Discharge and Exit Fees When Refinancing or Selling

Discharge fees are payable to the lender when the mortgage is repaid in full and the security is released. This occurs when the property is sold or when the loan is refinanced to a different lender. Discharge fees typically range from $150 to $400. Some lenders do not charge a discharge fee. The fee is not dependent on the interest rate type and applies equally to variable rate and fixed rate loans.

Government registration fees apply separately to the discharge of the mortgage. In the ACT, the fee to register a discharge of mortgage is significantly lower than the fee to register a new mortgage. Buyers should budget for both the lender discharge fee and the government registration fee when calculating the total cost of exiting a loan facility.

Variable rate loans do not attract break costs. Break costs apply only to fixed rate loans and compensate the lender for the economic loss incurred when a fixed rate contract is terminated before the end of the fixed period. Buyers who anticipate refinancing or selling within a short period after settlement may prefer a variable rate structure to preserve flexibility without incurring break costs. However, this decision should be weighed against the interest rate differential between variable and fixed products at the time of application.

Call one of our team or book an appointment at a time that works for you to discuss your variable rate loan structure and confirm the complete fee schedule applicable to your transaction.

Frequently Asked Questions