When applying for a home loan, understanding the various fees and costs associated with variable interest rate loans is crucial for making informed financial decisions. At AXTON Finance, we help clients across Hawthorn access Home Loan options from banks and lenders across Australia while ensuring complete transparency about all associated costs.
Understanding Variable Interest Rate Home Loans
Variable home loan rates fluctuate with market conditions and lender policies. Unlike a fixed interest rate home loan, your repayments can change throughout the loan term based on interest rate movements. This flexibility can work in your favour when rates fall, but it's important to budget for potential increases.
When calculating home loan repayments for a variable loan, consider that your monthly payments may change. Many borrowers appreciate the flexibility that variable rates offer, including the ability to make extra repayments without penalty and access to features like an offset account.
Key Fees Associated with Variable Rate Home Loans
Application and Establishment Fees
Most lenders charge an application fee when you apply for a home loan, typically ranging from $250 to $800. Some lenders may waive this fee as part of their current promotions or through interest rate discounts negotiated by your mortgage broker.
Ongoing Monthly Fees
Many variable rate loans include monthly account keeping fees, usually between $10 and $30 per month. These fees contribute to the overall cost of your loan over its lifetime.
Lenders Mortgage Insurance (LMI)
If your loan amount exceeds 80% of the property value (loan to value ratio or LVR), you'll likely need to pay lenders mortgage insurance. LMI costs vary based on your deposit size and loan amount, potentially adding thousands to your home loan costs. Consider exploring low LMI loans options that may reduce this expense.
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Valuation and Legal Fees
Lenders require property valuations to assess the security for your loan. Valuation fees typically range from $300 to $600, depending on the property type and location. Legal fees for settlement and documentation may also apply.
Discharge and Exit Fees
While many lenders have removed exit fees, some may still charge discharge fees when you pay off or refinance your loan. These typically range from $150 to $400.
Additional Costs When Buying a Home
Beyond your home loan fees, factor in additional costs:
- Stamp Duty: Varies by state and property value
- Building and Pest Inspections: $300-$800
- Conveyancing Fees: $800-$2,500
- Council Rates and Utilities Connections
Factors Affecting Your Borrowing Capacity
Lenders assess your financial situation comprehensively during the Home Loan application process. They'll review:
- Income and Employment Stability: Regular income demonstrates your ability to service the loan
- Existing Debts: Credit cards, personal loans, and other commitments affect your borrowing capacity
- Living Expenses: Your spending patterns influence how much you can borrow
- Deposit Size: A larger deposit may secure more favourable terms
The application process requires documentation including bank statements, payslips, and tax returns. Having these ready can help create a streamlined application process.
Making Variable Rates Work for You
Offset Accounts
Many variable rate loans offer offset account facilities. These accounts can significantly reduce your home loan interest rate by offsetting your savings against your loan balance.
Extra Repayments
Variable loans typically allow unlimited extra repayments, helping you pay off your loan faster and save on interest costs.
Rate Review Options
Stay informed about property market conditions and interest rate trends. If rates improve significantly, you may benefit from switching to a different variable product or negotiating with your current lender.
Getting Pre-Approved
Securing Home Loan pre-approval before house hunting provides several advantages:
- Clear understanding of your budget
- Stronger negotiating position with sellers
- Faster settlement process
- Confidence in the property market
At AXTON Finance, we guide Hawthorn clients through the get pre-approved process, helping you understand your borrowing capacity and home loan interest rate options.
Leveraging Your Home Equity
As you pay down your loan and property values increase, you build home equity. This equity can be valuable for future property purchases, renovations, or investments. Understanding how to access and utilise your equity effectively is crucial for long-term financial planning.
Choosing the Right Variable Rate Product
With numerous Home Loan options available, selecting the right variable rate product depends on your individual circumstances. Consider factors such as:
- Required features (offset accounts, redraw facilities)
- Fee structures
- Interest rate competitiveness
- Lender reputation and service quality
- Flexibility for future changes
Our experienced team at AXTON Finance works with clients throughout Hawthorn to identify suitable Home Loan Rates and products that align with their financial goals and circumstances.
Understanding variable rate home loan fees and costs empowers you to make informed decisions about one of life's most significant financial commitments. By working with knowledgeable mortgage brokers, you can access comprehensive advice and competitive loan options tailored to your needs.
Call one of our team or book an appointment at a time that works for you to discuss your variable rate home loan options and receive personalised advice for your property purchase.