Do you know what fees apply to variable investment loans?

Variable rate investment loans carry ongoing fees that directly affect your cashflow and the true cost of holding a rental property.

Most lenders charge an annual package fee, monthly account-keeping fees, or both. A package fee typically sits between $350 and $400 per year and often includes a small rate discount and fee waivers on transaction accounts or credit cards. Monthly account-keeping fees range from $10 to $15 per month and are charged regardless of whether you're making repayments or not. Some lenders waive the monthly fee if you hold a package, while others charge both.

Those costs are deductible when the property generates rental income, but they still reduce your net position each year. An investor holding a variable rate loan on a unit near Baulkham Hills Village with a $395 annual package fee and $12 monthly account-keeping fee pays $539 in fees annually before any other charges are added. Over a ten-year hold period, that's more than $5,000 in fees alone.

Application and Settlement Fees on Variable Rate Products

Most lenders charge an upfront application or establishment fee on new investment loans, and some also charge a settlement fee. The application fee typically ranges from $600 to $900, though a small number of lenders have removed it entirely. A settlement fee, where charged, is usually around $150 to $250. These costs apply regardless of whether you select a variable or fixed rate, but they form part of your initial outlay and are claimable in the year the loan settles.

Consider a buyer acquiring a townhouse as an investment in the North Rocks area of Baulkham Hills. The lender charges an $800 application fee and a $200 settlement fee. Those costs are added to the upfront settlement amount, which already includes stamp duty, solicitor fees and any property inspections. The $1,000 in loan establishment costs are a deductible expense, which reduces taxable income in the first year, but they must still be funded at settlement.

Valuation Fees and Lenders Mortgage Insurance

A valuation fee is charged by most lenders when they assess the security property. The fee ranges from $200 to $400 depending on the property type and location. Desktop valuations are sometimes used for lower-risk loans and may cost less, but a full valuation is standard for investment property.

If your deposit is below 20 per cent, the lender will require Lenders Mortgage Insurance. The premium is calculated as a percentage of the loan amount and increases with the loan-to-value ratio. At 85 per cent LVR, LMI on a loan might cost around 1.5 per cent of the loan amount. At 90 per cent LVR, it can exceed 3 per cent. That premium is a one-off cost, usually capitalised into the loan, and it is tax-deductible over the life of the loan or over five years, depending on how the ATO views your circumstances. Stamp duty on the LMI premium may also apply depending on your state, though New South Wales abolished LMI stamp duty in mid-2024.

Offset Account Fees and Transaction Costs

Some variable rate investment loans include a fee-free offset account as part of the package, while others charge a monthly fee or do not offer offset functionality at all. Where an offset account is available and carries a fee, that fee is usually between $10 and $20 per month. An offset account linked to an investment loan allows you to reduce the interest charged without reducing the deductible interest component, which makes it a useful structure for investors who want to maintain full deductibility while lowering their net interest cost.

Transaction fees, such as redraw fees or additional repayment fees, are less common on modern variable rate products but still appear with some lenders. A redraw fee might be $20 to $50 per withdrawal, and some lenders cap free redraws at a certain number per year. If you plan to make additional repayments and access those funds later, confirm the redraw terms before settling the loan.

Ongoing Service Fees and Rate Discount Conditions

Lenders that offer package discounts sometimes tie those discounts to conditions such as maintaining a linked transaction account, holding home and contents insurance with a related insurer, or keeping a minimum balance in an offset or savings account. If those conditions are not met, the lender may remove the rate discount or increase the annual package fee.

In our experience, investors in areas like Baulkham Hills who select a packaged variable rate loan and then close the linked transaction account or move their insurance elsewhere can lose a 0.10 to 0.20 per cent rate discount without realising it. That discount, applied to a loan amount, can be worth several hundred dollars per year. The package fee remains payable whether or not the discount conditions are maintained, so it's worth confirming what triggers a discount reduction and whether those conditions suit your banking preferences.

Discharge and Early Exit Fees

A discharge fee is charged when you repay the loan in full, whether through sale, refinancing, or another method. The fee is typically between $300 and $500 and covers the lender's administrative cost of releasing the mortgage and preparing discharge documents. Some lenders also charge a settlement fee on refinance, which is separate from the discharge fee and applies to the new loan.

Variable rate loans generally do not carry break costs, which means you can refinance or repay at any time without the risk of a penalty tied to interest rate movements. Fixed rate loans, in contrast, often carry substantial break costs if rates have fallen since the loan was fixed. That flexibility is one reason variable rate structures remain common among investors who expect to refinance within a few years or who want the option to sell without penalty.

How Fee Structures Vary Across Property Types in Baulkham Hills

Lenders apply different risk pricing to different property types, and that pricing sometimes extends to fee structures. A variable rate loan on a freestanding house in central Baulkham Hills near Windsor Road generally attracts standard fees, while a loan on a unit in a higher-density development or a property with a significant body corporate liability may attract a higher valuation fee or a risk-adjusted rate margin that increases the effective cost of the loan.

Property investors in this area often hold units near the new Northwest Metro line, which are straightforward to value and finance. A standard valuation fee applies, and offset account access is typically included in a package product. A loan on a dual-occupancy site or a property with non-standard construction, however, may require a more detailed valuation, and some lenders will not offer offset accounts or package pricing on those properties at all. Clarify fee structures at the application stage, particularly if the property has characteristics that might affect serviceability or security assessment.

Call one of our team or book an appointment at a time that works for you. We'll review your proposed investment structure, confirm the fee schedule with lenders who are active in Baulkham Hills, and help you calculate the actual holding cost once all fees and charges are included.

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