Variable Rate Loans for First Home Buyers: Fees Explained

You'll typically pay between $600 and $1,500 in application and valuation fees when you apply for a variable rate home loan.

That's just the starting point. When you're buying your first home on the Central Coast or anywhere in Australia, the interest rate often gets all the attention while the fee structure sits quietly in the background. In our experience, many first home buyers focus entirely on finding the lowest variable interest rate without calculating how much they'll actually spend on fees over the first year. A loan that looks cheaper on paper can cost more once you account for monthly account fees, offset account charges, and the upfront costs of setting everything up.

Application and Valuation Fees: What You're Paying For

Most lenders charge between $300 and $600 for processing your first home loan application, plus another $200 to $300 for a property valuation.

Consider a buyer who's looking at a property in Wamberal and has found two lenders offering similar variable rates. The first lender charges a $600 application fee with no ongoing monthly fees and includes a free offset account. The second lender advertises no application fee but charges $15 per month for account keeping and $10 per month for offset access. Over the first year alone, that second option adds $300 in ongoing fees, effectively wiping out the upfront saving. Some lenders will waive application fees during promotional periods, but you need to read what happens after the honeymoon period ends. The valuation fee is rarely negotiable because it covers the cost of an independent assessment, which protects both you and the lender.

Lenders Mortgage Insurance: The Biggest Upfront Cost

Lenders Mortgage Insurance can add between $8,000 and $20,000 to your upfront costs if you're borrowing more than 80% of the property value.

This isn't an optional fee. If you're using a 5% deposit or 10% deposit to get into the market, LMI covers the lender's risk when your deposit falls short of the 20% threshold. As an example, someone purchasing a $700,000 home in Terrigal with a 10% deposit would typically pay around $18,000 in LMI on a variable rate loan. You can capitalise this cost into your loan amount rather than paying it upfront, but that means you're paying interest on it for the life of the loan. The First Home Loan Deposit Scheme allows eligible buyers to avoid LMI entirely with a deposit as low as 5%, which can change the maths completely. We regularly see this scheme make a genuine difference to how quickly someone can move from renting to owning, particularly when combined with first home owner grants or first home buyer stamp duty concessions available in New South Wales.

Ongoing Account Fees and Offset Charges

Some variable rate home loans charge between $10 and $20 per month just to keep the account open, which adds up to $240 per year.

Not every lender structures fees this way. Many now offer packaged variable loans with no monthly account fee, while others bundle in offset account access at no extra cost. An offset account can reduce the interest you pay without changing your repayment amount, but if you're being charged $10 per month for the privilege, you need at least a few thousand dollars sitting in that account to break even. In a scenario like this, a buyer with $500 in their offset account paying $120 per year in fees would actually lose money compared to having no offset facility at all. Look at what you'll realistically keep in that account before deciding whether the fee structure makes sense for your situation. The loan health check approach we use often reveals that buyers are paying for features they never use.

Redraw Facilities and When They Cost You

Most variable rate loans include free redraw, but some lenders charge between $20 and $50 per withdrawal if you need to access extra repayments you've made.

Redraw works differently from an offset account. When you make extra repayments on your variable loan, that money reduces your principal and the interest you're charged. If you need that money back later, redraw lets you withdraw it, but the fee structure varies wildly between lenders. Some charge nothing, others charge per transaction, and a few restrict how often you can access it. For someone who plans to make irregular lump sum payments whenever they have spare cash, paying $30 every time they need to withdraw defeats the purpose. We regularly see this come up with first home buyers who receive financial help from family as a gift deposit and want flexibility to access funds if their circumstances change. Knowing whether your lender charges for redraw access should factor into your home loan application before you commit.

Settlement and Discharge Fees You'll Pay Later

You'll pay between $300 and $500 in settlement fees when your loan is finalised, and potentially another $350 if you refinance or sell within a few years.

Discharge fees often catch people by surprise because they only apply when you're leaving the lender. If you decide to refinance to a better variable interest rate in two years, or if you sell the property, the lender charges an administrative fee to close the loan and remove their mortgage from the title. This doesn't stop you from refinancing when it makes financial sense, but it's a cost worth factoring in when you're comparing loan options. Settlement fees are paid at the same time as your deposit and stamp duty, so they need to be part of your first home buyer budget from the beginning. We've seen buyers on the Central Coast carefully save their deposit and factor in stamp duty concessions, only to realise a week before settlement that they're short on the legal and bank fees.

When you're ready to move forward with your first home loan application, call one of our team or book an appointment at a time that works for you. We'll map out exactly what you'll pay upfront and ongoing, so there are no surprises between pre-approval and settlement.

Frequently Asked Questions