Find out about fees and features
| Fees and charges can add a lot to the cost of borrowing. When comparing different home loans, make sure you check out all the mortgage product features and fees so you know exactly how much the loan is going to cost you – and also so that you don't pay for more than you need. | |
Fees
You must be told about any fees or charges before you sign up for a loan. Most credit providers publish fees and charges in their product booklets and on their websites. Fees and charges can change, so make sure you check the latest information.
Different credit providers charge different fees – and you'll find there are a variety of names for these. Here are some of the most common ones you will come across as you are checking out home loans.
Start-up fees
(also called 'application', 'up-front', 'establishment' or 'set-up' fees)
Start-up fees are usually a one-off payment when you start your loan. If you are not being charged a start-up fee, look out for any early-exit fee. Both start-up and early-exit fees may amount to thousands of dollars.
Ongoing fees
(also called 'service' fees)
Ongoing fees are charged monthly or annually for administering your loan. Some service fees may only be payable in certain circumstances – for example, you might be charged a fee to redraw any additional repayments you might have made.
Fees for breaking a fixed rate mortgage
(also called 'break' fees)
You may be charged a flat switching fee and a variable fee if you break your fixed rate mortgage. The variable fee can be very high. In general, the more that interest rates have come down since you decided to take on the fixed rate, the higher the variable fee will be. The variable fee is unpredictable – you won't know how much it will be until you decide to break your fixed rate mortgage and the credit provider advises you.
Early-exit fees on variable rate mortgages
(also called 'early termination', 'deferred establishment', 'deferred application' or 'early discharge' fees)
An early-exit fee may be charged if you pay out your loan within a specified period (for example, in the first three years). Shop around, because not all credit providers charge these fees. In some cases, early-exit fees can be very high (over $5,000), so you may be better off with a credit provider that charges a higher start-up fee but no early-exit fees.
Termination fees
(also called 'discharge' fees)
Termination fees may be charged when you pay out your mortgage (whenever that is).
Features
Some loans offer useful features that you may want to take advantage of now or in the future. Work out which features you are most likely to use, so that you don't pay for more than you need.
Extra payments are allowed
Are you allowed to make additional repayments? If so, you can save on interest and pay off your loan quicker. See making repayments for tips on how to own your own home sooner by making extra payments.
Redraw facility available
If you want future access to any additional repayments you've made, you'll need a redraw facility.
An offset account can be opened
An account that is linked to your home loan. The balance of the offset account reduces the amount of interest payable on your loan. See choosing a home loan for details of what to look out for when considering one of these accounts.
Repayments can be made by direct debit from an account
Can your home loan repayments be made via direct debit?
Always look for the comparison rate. This is a better indicator of the real cost of a loan because it includes the interest rate plus most fees and charges.
Check out all the product features and fees before you take out a home loan, so that you will be able to pick and choose the features you need and be clear about what the loan is going to cost you in the long run.
More information
FIDO Website: Printed 09/10/2010
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