Top tips to understand variable rate loan fees and costs

What fees apply when you take out a variable rate home loan?

Variable rate home loans typically attract an application fee, a valuation fee, and settlement costs.

Application fees range from $200 to $800 depending on the lender, though many waive this entirely. The valuation fee covers the cost of the lender's independent property assessment and usually sits between $200 and $400. Settlement fees cover the cost of registering the mortgage and preparing loan documents, often totalling $400 to $1,200. Some lenders bundle these into a single establishment fee, while others itemise each charge separately.

Lenders Mortgage Insurance is the largest single cost for buyers with less than a 20% deposit. For a buyer in Belmont using the Australian Government 5% Deposit Scheme, LMI is waived entirely. Outside that scheme, LMI on a 10% deposit can range from $8,000 to $20,000 depending on the property value and your income profile. You can add LMI to the loan balance rather than paying it upfront, though this increases the total amount you repay over time.

Upfront costs beyond the lender's fees

Beyond lender fees, first home buyers need to budget for conveyancing, building and pest inspections, and government charges.

Conveyancing fees in Geelong typically sit between $1,200 and $2,000 depending on the complexity of the sale. Building and pest inspections generally cost $400 to $700 combined. If you're buying in Victoria as a first home buyer, you may qualify for a full stamp duty exemption on properties valued up to $600,000, or a sliding concession up to $750,000. That exemption can save you thousands compared to buyers who don't meet the residence and ownership criteria.

Consider a buyer purchasing in Highton using a 10% deposit outside the 5% Deposit Scheme. Their upfront budget includes roughly $1,500 for conveyancing, $600 for inspections, $500 in lender fees, and potentially $12,000 in LMI. If the property is valued under $600,000 and they qualify for the stamp duty exemption, they avoid another $20,000 to $30,000 in government charges. That exemption is often the difference between proceeding with the purchase and waiting another year to save more.

Ongoing fees that continue after settlement

Variable rate loans carry annual fees, transaction charges, and optional account fees depending on the features you choose.

Annual package fees range from $0 to $395 per year. Most lenders charge no monthly account-keeping fee on standard variable loans, though premium packages with offset accounts or rate discounts often attract the higher end of that range. Transaction fees are rare on owner-occupier loans but may apply if you exceed a set number of additional repayments or redraws in a given month.

An offset account typically adds $10 to $15 per month to your loan costs, either through a higher annual fee or a slightly higher interest rate. Redraw facilities are generally offered at no extra charge on variable loans, though some lenders cap the number of free redraws per year. If your lender allows unlimited redraws and you plan to make lump sum payments whenever possible, a redraw facility can reduce your interest without the ongoing cost of an offset.

How fees vary between lenders in the Geelong market

Lender fee structures differ more than borrowers expect, particularly when comparing major banks to regional lenders and non-bank providers.

One major bank might charge a $600 application fee and a $395 annual package fee but offer a discounted interest rate. A regional lender might waive both fees entirely but price the loan 0.15% higher. Over the life of a loan, the difference between those two structures can exceed $10,000 depending on how long you hold the loan and whether you refinance within the first few years.

In our experience, buyers in Lara and Ocean Grove often benefit from comparing at least three to four lenders with genuinely different pricing models. A loan structured with an offset account and no application fee might suit a buyer with irregular income from seasonal work, while a no-frills variable loan with a lower rate and a one-off establishment fee often works better for buyers on stable wages who plan to set and forget their repayments. The structure that minimises cost for one buyer can add thousands to the total repayment for another, depending on how they use the loan features.

Why some buyers pay more in fees than others

Fee waivers and discounts depend on your deposit size, employment type, and whether you meet the lender's preferred borrower profile.

Buyers with a 20% deposit and full-time employment on a standard PAYG income often qualify for the lowest application fees and the most competitive rates. Buyers who are self-employed, casual, or purchasing with a 5% or 10% deposit may face higher application fees or be offered products with fewer fee waivers. Some lenders reserve their lowest-cost variable loans exclusively for borrowers who don't require LMI, even when the loan itself is otherwise identical.

A buyer in Torquay working two part-time roles might be quoted a $600 establishment fee where a borrower with the same deposit and property value but a single full-time contract is quoted $0. That difference reflects the lender's risk assessment, not the actual cost of processing the loan. If you're refinancing within a few years or using equity to upgrade, paying a higher upfront fee for access to a more flexible loan can still represent better value than locking into a low-fee product that restricts additional repayments or charges high exit fees.

What exit fees and discharge costs apply when you refinance or sell

Most variable rate loans no longer carry ongoing exit fees, but discharge fees still apply when you repay the loan in full.

Discharge fees cover the administrative cost of removing the mortgage from the property title and typically range from $150 to $400. Some lenders also charge a settlement processing fee if you refinance within the first one to two years, though this is less common on standard variable products than on fixed or packaged loans. If you took advantage of a cashback offer or a waived application fee, some lenders claw back part of that incentive if you refinance within 24 months.

A buyer who refinances 18 months after settlement to access a lower rate might pay a $350 discharge fee to their original lender, a $250 application fee to the new lender, and another $1,200 in conveyancing costs. If the rate reduction saves $200 per month, the upfront cost of switching is recovered in under four months. If the saving is only $80 per month, it takes nearly two years to break even, and refinancing may not deliver value unless you also consolidate other debt or access equity for renovations.

How to budget accurately for your first variable rate loan application

Start by requesting a full fee schedule from your lender or broker before you apply for pre-approval.

Many buyers calculate their deposit and assume settlement costs will be covered by savings or family gifts, only to discover two weeks before settlement that they're $3,000 short. A realistic budget includes your deposit, all lender fees, conveyancing, inspections, and a buffer for unexpected costs such as additional documentation requests or higher-than-expected strata reports on unit purchases.

We regularly see buyers in Geelong underestimate the cost of LMI when purchasing with a 10% deposit outside the 5% Deposit Scheme. If your deposit sits just below 20%, consider whether waiting an additional three to six months to reach that threshold would save more in LMI than you'd lose in rent or potential property price movement. If waiting isn't practical, factor LMI into your borrowing capacity early so you're not surprised when the final loan amount is approved.

Call one of our team or book an appointment at a time that works for you. We'll walk through the full cost breakdown for your situation and make sure your budget reflects what you'll actually need at settlement.

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