The Easiest Way to Understand Investment Loan Fees

Most lenders quote an interest rate upfront. The ongoing cost of a variable rate investment loan includes at least three other charges that show up in different places across the life of the loan.

Knowing where fees appear matters when comparing loan offers and when budgeting for cashflow, especially if the rental yield is tight or the property sits vacant between tenants. Some fees appear on every statement. Others are charged once at settlement. A handful are applied only if you make a particular request or if the loan structure changes.

Application and Approval Fees

Most lenders no longer charge upfront application fees on new variable rate investment loans. The few that still do typically waive the fee as part of a package or when you refinance.

Valuation fees are charged separately from the application. You pay for a valuer to inspect the property and provide a report to the lender. The cost depends on the property type and location. A two-bedroom unit in Ringwood East usually costs between $200 and $350. Vacant land or multi-unit sites attract higher fees.

Settlement fees sit at around $150 to $300 and are deducted from the loan amount at settlement or invoiced directly. Some lenders bundle this as a 'loan establishment fee'. Others split out legal and documentation costs as separate line items. The total you pay at settlement is functionally the same.

Ongoing Account Fees

Most variable rate investment loans charge a monthly account-keeping fee. This typically sits between $10 and $15 per month and appears on your loan statement. Over a year that adds $120 to $180 to the cost of the loan.

Packaged investment loans often waive the monthly fee if you hold a minimum loan balance or bundle your owner-occupied and investment lending with the same lender. Read the package terms closely. Some packages charge an annual fee that exceeds the value of the monthly fee waiver, especially if your loan balance is below $400,000.

Offset Account Fees and Package Fees

An offset account linked to a variable rate investment loan reduces the interest charged on the loan without altering your deductions. The loan balance remains unchanged. You claim interest on the full amount.

Some lenders charge a monthly offset account fee of $10 to $20. Others include the offset as part of an annual package fee, which typically ranges from $300 to $400 per year. Whether the offset delivers value depends on how much cash you hold in the account and for how long. If you keep less than $20,000 in the offset on average, the fee often exceeds the interest saved.

Consider a property investor in Ringwood East with a $500,000 variable rate loan at 6.5 per cent and $15,000 sitting in an offset account. That offset saves roughly $975 per year in interest. If the package fee is $395 and includes the offset, the net saving is around $580. If your offset balance drops to $8,000, the annual saving falls to around $520, and the package delivers less value.

Break Costs and Discharge Fees

Variable rate loans do not charge break costs. You can repay the loan in full or refinance to another lender without penalty. Fixed rate loans charge break costs if you exit early or repay more than the agreed prepayment limit.

When you sell the property or refinance, the lender charges a discharge fee. This fee covers the cost of releasing the mortgage and preparing settlement documents. Discharge fees range from $300 to $500 depending on the lender. Budget for this at the start, especially if you plan to sell within the first few years.

Variation Fees and Redraw Fees

A variation fee applies if you change the loan structure after settlement. Adding a split loan, extending the interest-only period, or switching to principal and interest repayments can trigger a fee of $150 to $300.

Some lenders allow you to request one free variation per year. Others charge every time. If you expect to adjust the loan within the first 12 months, check whether the lender includes a free variation in the package.

Redraw fees apply when you withdraw extra repayments you have made above the minimum. Most variable rate investment loans do not charge redraw fees. A small number of lenders still apply a fee of $10 to $50 per redraw request. If you expect to make additional repayments and then access those funds for future investment property purchases or renovations, confirm the redraw policy before you settle.

Lenders Mortgage Insurance

Lenders Mortgage Insurance is charged when your deposit is below 20 per cent of the property value. The premium is calculated as a percentage of the loan amount and increases as your deposit shrinks. For an 85 per cent loan to value ratio, the premium might sit around 1.5 per cent of the loan amount. At 90 per cent, it can reach 3 per cent or more.

LMI can be paid upfront or capitalised into the loan. Capitalising the premium increases your total borrowing and the interest you pay over time. The premium is a one-off cost. It does not recur if you refinance, provided your loan balance has not increased above the original loan to value ratio.

When comparing investment loan options, ask for a breakdown that includes LMI if your deposit is below 20 per cent. The total borrowing cost is often clearer when LMI is shown as a dollar figure rather than a percentage.

Annual Reviews and Rate Adjustments

Variable rate loans do not charge a fee when the lender adjusts your interest rate. Rate changes occur when the Reserve Bank moves the official cash rate or when the lender reprices its variable products.

Some lenders conduct an annual loan review and charge a review fee if your circumstances have changed or if the property has declined in value. Most do not charge for this unless you request a formal reassessment or a reduction in your interest rate. If you are considering a refinance, a formal review might trigger a fee that makes switching to a new lender more cost-efficient.

Fee Waivers and Negotiation

Most lenders advertise a standard rate and fee schedule. Rate discounts and fee waivers are negotiated after the application is lodged, often in response to competing offers or when your deposit and income are strong.

Waivers on application fees, settlement fees, and annual package fees are more common when you borrow above $500,000 or when you consolidate multiple loans with one lender. Lenders are less flexible on valuation fees and LMI premiums, as those costs are passed directly to third parties.

If you are comparing two lenders with similar variable rates, the difference in total fees over 12 months can exceed $800. That figure matters when rental income is marginal or when you are holding multiple properties and compounding costs across the portfolio.

Call one of our team or book an appointment at a time that works for you. We will break down the full fee structure for each lender and help you weigh the real cost of each option before you commit.

Frequently Asked Questions