Beginner's Guide to Variable Investment Loan Fees

Variable rate investment loans come with several fee structures that directly affect your cashflow and overall return on property.

For self-employed contractors juggling variable income, understanding these costs upfront means you can budget accurately and choose a loan product that aligns with your income patterns. The fees you pay on a variable rate loan differ from fixed rate products, and some charges only appear when you make certain changes to your loan.

Application and Establishment Fees

Most lenders charge an upfront application or establishment fee to process your investment loan application. This fee typically ranges from zero to around $900, depending on the lender and loan product.

Some lenders waive this fee entirely as part of promotional offers or ongoing competitive positioning, while others charge a flat rate regardless of your loan amount. If you are applying for multiple investment properties simultaneously or refinancing an existing portfolio, these fees can accumulate quickly. We regularly see contractors who assume these costs are non-negotiable, but in our experience, many lenders will reduce or waive establishment fees when you are borrowing a substantial amount or bringing multiple properties across.

Ongoing Monthly or Annual Account Fees

Variable rate investment loans often carry a monthly account-keeping fee or annual package fee. Monthly fees usually sit between $10 and $15 per month, while annual package fees range from $200 to $400.

Package fees sometimes bundle additional benefits such as fee waivers on offset accounts, discounted rates on subsequent properties, or reduced fees for transaction accounts and credit cards linked to the same lender. Consider a contractor who holds two investment properties with the same lender under a professional package that costs $395 annually. That package might deliver a 0.30% rate discount on both loans and waive offset account fees, which on a combined loan balance of $1.2 million would save several thousand dollars in interest each year. The annual fee becomes negligible when compared to the compounding benefit of the rate discount and borrowing capacity improvements from offset account access.

Offset Account and Redraw Fees

Many variable rate investment loan products include an offset account or redraw facility at no additional cost, but not all do. Some lenders charge a monthly fee for each offset account, typically between $10 and $20 per month, while others restrict the number of free offset accounts per loan or per package.

Redraw facilities allow you to access extra repayments you have made above the minimum, but some lenders charge a fee each time you redraw funds. This fee can range from $10 to $50 per transaction, and if you are using your loan as a flexible cash management tool during periods of uneven contractor income, these charges add up. Before committing to a loan, confirm whether offset and redraw access is included and whether there are limits on how often you can access those funds without penalty.

Valuation Fees

When you apply for an investment loan, the lender will order a valuation of the property to confirm its market value and calculate your loan to value ratio. Valuation fees are usually between $200 and $400, depending on the property type and location.

In some cases, lenders will waive the valuation fee as part of a promotion or if you are refinancing with them and they already hold a recent valuation. If you are purchasing in a high-density area of Sydney such as Parramatta or the Inner West, desktop valuations are sometimes used instead of full inspections, which can reduce the cost. When refinancing multiple properties or releasing equity to fund further purchases, you may be charged a valuation fee for each property unless the lender offers a bulk waiver.

Discharge and Settlement Fees

When you pay off your investment loan in full or switch to another lender, your current lender will charge a discharge fee to process the release of the mortgage over the property. This fee typically ranges from $150 to $400.

Settlement fees are sometimes charged by the new lender when you refinance, though many lenders now include settlement processing in their establishment fee or waive it altogether. If you are moving your portfolio across to a new lender to access better investor interest rates or improved loan features, factor in both the discharge fee from your existing lender and any settlement or establishment fees from the new one. In a scenario where a contractor refinances three investment properties to consolidate debt and improve cashflow, the combined discharge and establishment fees might total $2,000, but the reduction in monthly repayments and access to offset accounts often recovers that cost within the first year.

Break Costs on Variable Loans

Variable rate loans do not carry break costs in the same way fixed rate loans do, but some lenders apply early repayment fees or economic cost adjustments if you pay off the loan within a certain period, typically the first one to three years.

These fees are rare on standard variable investment loans but can appear on discounted or honeymoon rate products where the lender has offered a lower initial rate in exchange for a minimum loan term. If you are planning to refinance within the first few years to access equity or consolidate properties, confirm with your broker whether any early exit penalties apply to the variable product you are considering.

Rate Discount Expiry and Review

Many variable rate investment loans include an introductory rate discount or ongoing discount that is subject to annual review or expiry after a set period. While this is not a fee in the traditional sense, the loss of a discount effectively increases your interest rate and your monthly repayment.

Some lenders apply a discount for the first 12 months and then revert to a higher standard variable rate unless you actively request a review. Others tie ongoing discounts to maintaining a minimum loan balance, holding a package product, or keeping your loan with them for a certain period. We regularly see contractors who secured a variable rate with a 0.50% discount in the first year, only to have that discount halve or disappear entirely without notification. Keeping a regular review schedule with your broker ensures you are aware of any upcoming changes and can refinance or renegotiate before your repayments increase.

Lenders Mortgage Insurance

If your deposit is less than 20% of the property value, you will be required to pay Lenders Mortgage Insurance, which protects the lender if you default on the loan. LMI is a one-off cost that can range from a few thousand dollars to tens of thousands, depending on your loan amount and deposit size.

For investment properties, LMI is capitalised into the loan and becomes part of your total debt, which means you pay interest on it over the life of the loan. Some lenders offer LMI waivers for certain professions, but self-employed contractors are rarely eligible for these. If you are using equity from your home to fund the deposit on an investment property, you may still trigger LMI on the investment loan if the combined borrowing pushes your loan to value ratio above 80% on that specific property.

Call one of our team or book an appointment at a time that works for you to review your current investment loan fees and confirm whether your variable rate product still aligns with your property investment strategy and income structure.

Frequently Asked Questions