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What fees could you face on your home loan?

17 Apr 14

Before you seek real estate tips and secure your perfect property, you will first need to ensure you can obtain the finance needed to make the purchase.

While this can at times be a daunting process, the good news is there is plenty of help and advice available to make it as stress-free as possible.

One factor you need to consider before signing up for a home loan is the fees that are involved - you might notice them in the fine print but be unsure of what exactly they mean.

Establishment fee

This is a charge associated with setting up your home loan - it's a one-off payment that not everyone will face.

Some mortgages with an establishment fee will have lower rates of interest, so don't disregard all products that come with this charge without doing your homework.

In some cases, if you are not faced with an establishment fee then your charges might be higher throughout the duration of your home loan.

Lenders mortgage insurance (LMI)

The financial institution you borrow from might charge LMI, which is a type of insurance taken out by credit providers in case you find yourself unable to repay a loan.

The amount of LMI charged can vary quite considerably, but it is common for it to be applied to your mortgage in the form of a one-off payment.

In general terms, the lower the loan-to-value ratio on your property, the less chance the lender will have to charge you a fee for LMI.

Service and administration fees

Some lenders will charge ongoing fees for the administration of your account, whereas others will only impose additional charges in certain circumstances.

Early exit fees

If you manage to pay off your home loan in full before the agreed upon date, you might be subject to an early exit fee, although the amount that can be charged is limited by law.

These charges are only applicable on loans taken out before July 1 2011.