Variable Rate Loan Fees & Costs First Home Buyers Miss

What You'll Pay Beyond the Interest Rate

The interest rate on a variable rate loan is only part of what you'll pay. Application fees, valuation costs, settlement fees, and lenders mortgage insurance can add thousands to your upfront costs, and ongoing account fees can chip away at your budget each year.

Consider a buyer purchasing in Ballina with a 10% deposit. The lender charges a $600 application fee, $250 for the valuation, $150 for settlement, and around $8,000 in lenders mortgage insurance because the deposit is under 20%. That's close to $9,000 in costs before a single mortgage payment is made. The loan also carries a $10 monthly account keeping fee, which adds $120 a year. Knowing these figures upfront means you can factor them into your savings target and avoid scrambling for extra cash at settlement.

Application and Valuation Fees

Most lenders charge an application fee to process your home loan application, typically between $300 and $700. Some lenders waive this fee during promotional periods, but it's not standard. The valuation fee covers the cost of an independent property valuation and usually sits between $200 and $400, depending on the property location and type.

These fees are generally payable upfront or at settlement. Some lenders allow you to capitalise them into the loan, which means you don't pay them out of pocket but you will pay interest on them over the life of the loan. If you're tight on cash before settlement, capitalising can help, but it does increase the amount you borrow and the total interest you'll pay over time.

Lenders Mortgage Insurance

Lenders mortgage insurance is charged when your deposit is below 20% of the property value. The premium protects the lender if you default, and the cost varies depending on your deposit size and the loan amount. A 10% deposit typically results in a lower premium than a 5% deposit.

In our experience, buyers in Northern NSW are often surprised by how much LMI adds to their upfront costs. A $500,000 loan with a 5% deposit might carry an LMI premium of $15,000 to $20,000, while the same loan with a 10% deposit might be closer to $8,000 to $12,000. The premium is usually added to your loan balance rather than paid in cash, but you'll pay interest on it for the life of the loan.

If you're eligible for the Australian Government 5% Deposit Scheme, the government guarantees the portion of the loan above your deposit, and you won't pay LMI. That can save you tens of thousands of dollars. The scheme is available through a panel of participating lenders, and income caps were removed from October 2025, making it accessible to more buyers. Property price caps still apply, and they vary by location. Regional areas in Northern NSW generally sit under the relevant caps, so it's worth checking your eligibility before you commit to paying LMI.

Settlement and Legal Costs

Settlement fees are charged by your lender to finalise the loan and typically range from $150 to $300. You'll also need to pay for conveyancing or legal services to handle the property transfer, title searches, and any issues that come up during the contract period. Conveyancing costs in regional NSW usually sit between $1,200 and $2,000, depending on the complexity of the transaction.

If you're buying in a regional area like Lismore or Grafton, your conveyancer will also arrange searches for things like flood history, zoning, and council rates. These searches are not optional, and the cost is usually included in the conveyancing quote, but it's worth confirming upfront so you're not hit with additional charges later.

Ongoing Account Fees and Offset Accounts

Variable rate loans often come with a monthly account keeping fee, usually between $10 and $15. Some lenders waive this fee if you hold other accounts with them or meet certain conditions like depositing your salary into a linked transaction account.

An offset account can reduce the interest you pay by offsetting your savings balance against your loan balance. If you have $20,000 in an offset account and a $400,000 loan, you only pay interest on $380,000. Offset accounts are common on variable rate loans and can save you thousands over the life of the loan, but some lenders charge a higher monthly fee for loans with an offset facility. The fee might be $15 or $20 instead of $10, so you need to weigh the ongoing cost against the interest saving.

Redraw facilities allow you to access extra repayments you've made on your loan, and they're usually included at no extra cost on variable rate loans. Offset accounts are more flexible because the money sits in a separate account and can be accessed anytime without affecting your loan balance, but redraw can work well if you're disciplined about making extra payments and don't need frequent access to those funds.

Stamp Duty Concessions and First Home Owner Grants

New South Wales offers a full stamp duty exemption on properties up to $800,000 for eligible first home buyers, with a sliding concession up to $1,000,000. For vacant land, the full exemption applies up to $350,000 and phases out at $450,000. The First Home Owner Grant in NSW is $10,000 and applies only to new builds or substantially renovated homes, with a purchase cap of $600,000 or a land and build cap of $750,000.

Queensland first home buyers can access a $30,000 grant for eligible contracts signed before 30 June 2026 on new homes valued under $750,000. For established homes, no transfer duty applies on purchases up to $700,000, with a concession on properties up to $800,000. If you're buying near the NSW-Queensland border, understanding which state's concessions apply can make a significant difference to your upfront costs.

These concessions reduce the cash you need at settlement, but they don't eliminate all costs. You'll still need to cover your deposit, lender fees, conveyancing, and any LMI if applicable. Buyers sometimes assume the grant or stamp duty saving will cover their settlement costs, but in most cases it won't, and you'll need additional savings on top of your deposit.

What to Budget for Upfront

Your total upfront costs will depend on your deposit size, the property price, and whether you're eligible for any government schemes. As a starting point, budget for your deposit, plus 3% to 5% of the property price to cover stamp duty (if applicable), lender fees, conveyancing, and settlement costs. If you're paying LMI, add that to the total as well, even if it's being capitalised into the loan.

Buyers in regional areas often have more affordable property prices than capital city buyers, but the upfront costs still add up quickly. A $450,000 purchase with a 10% deposit means $45,000 for the deposit, plus another $15,000 to $20,000 for costs if you're not eligible for stamp duty concessions. If you are eligible, that figure might drop to $5,000 to $8,000, which makes a significant difference to how much you need to save.

If you're unsure what your total costs will be, get a detailed breakdown from your lender or broker before you commit. That way you can plan your savings properly and avoid any last-minute stress when settlement rolls around.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions