A fixed rate loan gives you certainty on repayments, but the fees attached to that certainty can add thousands to your upfront costs or catch you out if your plans change.
Application and Establishment Fees on Fixed Rate Loans
Most lenders charge an upfront application fee when you take out a fixed rate loan, typically between $300 and $600. Some lenders waive this fee entirely, while others roll it into the loan amount so you don't pay it out of pocket. Rolling fees into the loan means you'll pay interest on them over the life of the loan, which can add up over time.
Consider a buyer refinancing to a fixed rate. One lender quotes a $395 application fee plus a $200 valuation cost. Another lender charges no application fee but requires a $150 settlement fee. The second option looks cheaper at first, but when you add conveyancing and any lender-specific costs, the total can still push past $1,500. Ask for a breakdown of every charge before you commit, including any fees for things like document preparation or discharge costs down the track.
Some lenders also charge a rate lock fee if you want to secure a fixed rate before settlement. This can be $300 to $750 depending on the lender and the lock-in period. If rates drop before settlement, you've paid for protection you didn't need. If rates rise, the fee might save you thousands. Whether it's worth it depends on how volatile rates are at the time and how far out your settlement date sits.
Break Costs and Why They Can Run Into Thousands
Break costs apply if you exit a fixed rate loan early, whether you're selling, refinancing, or paying off a lump sum above the allowed threshold. The cost is based on the difference between the rate you locked in and the rate the lender can now lend that money at, multiplied by the remaining fixed term.
If you fixed at 4.5% for five years and want to exit after two years when rates have dropped to 3.8%, the lender has lost income on that gap. They calculate the loss across the remaining three years and charge you for it. This can range from a few hundred dollars to $20,000 or more depending on the loan amount, the rate gap, and how much time is left.
In our experience, break costs surprise borrowers who assume they can refinance or sell without penalty. Some lenders allow partial prepayments of up to $10,000 or $30,000 per year without triggering a break cost. If you think there's any chance you'll need to exit early, check the prepayment limits and whether the lender offers a portable loan option that lets you take the fixed rate with you to a new property.
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Ongoing Account Fees and Offset Restrictions
Fixed rate loans often don't include an offset account, or if they do, the offset might not reduce the interest you pay during the fixed period. Some lenders charge a monthly account fee of $10 to $15 on top of the loan, which adds $120 to $180 per year. Variable rate loans usually include offset accounts at no extra cost, so if you're comparing a fixed rate against a variable rate, factor in what you'd save by parking savings in an offset.
If your fixed rate loan does come with an offset, check whether it's fully linked or capped. A capped offset might only reduce interest on the first $50,000 of your balance, which limits the benefit if you've got a larger deposit or savings buffer. For borrowers who expect to keep a decent amount in savings, a split loan with part fixed and part variable can give you the offset benefit on the variable portion while keeping some repayment certainty on the fixed side.
Switching or Refinancing Fees Before the Fixed Term Ends
If you want to switch from fixed to variable before your fixed term ends, most lenders treat that as breaking the fixed rate contract. You'll be hit with break costs as outlined earlier, even if you're staying with the same lender. Some lenders allow you to switch to a new fixed rate without a break cost, but only if rates have risen since you first locked in.
Refinancing to another lender during a fixed term means paying break costs to your current lender, plus application and settlement fees to the new lender. This can total $3,000 to $5,000 or more depending on the break cost calculation. If you're approaching the end of your fixed term, it's usually worth waiting rather than refinancing early. Most lenders let you lock in a new fixed rate up to 90 days before your current term expires, so you can secure the new rate without paying break costs.
Discharge Fees When You Sell or Pay Off the Loan
When you pay off a fixed rate loan in full, whether you're selling the property or refinancing elsewhere, the lender charges a discharge fee to cover the administrative cost of releasing the mortgage. This is usually between $150 and $400. Some lenders also charge a government registration fee for removing the mortgage from the title, which varies by state but typically sits around $150 to $200 in Western Australia.
If you're selling during the fixed term, you'll also pay any applicable break costs on top of the discharge fee. If you're nearing the end of the fixed period, even by a few weeks, it can be worth delaying settlement to avoid the break cost. A conveyancer or broker can help you time the sale or refinance to fall after the fixed term expires, which can save you thousands.
When you're looking at a fixed rate product, ask your broker or lender for a full cost schedule that includes application fees, ongoing account fees, prepayment limits, break cost scenarios, and discharge fees. The rate itself matters, but the fees around it can shift the total cost significantly. If your situation might change in the next few years, whether that's selling, upgrading, or paying down the loan faster, a variable or split option might give you more flexibility without the risk of a large exit penalty.
Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structure on any fixed rate loan and help you compare the total cost across different lenders and loan types.
Frequently Asked Questions
What are break costs on a fixed rate home loan?
Break costs apply if you exit a fixed rate loan early by selling, refinancing, or making a large repayment above the allowed limit. The cost is based on the interest rate difference and remaining fixed term, and can range from a few hundred to over $20,000.
Can I refinance during a fixed rate term without paying fees?
Refinancing during a fixed term usually triggers break costs, even if you stay with the same lender. It's often worth waiting until your fixed term ends or locking in a new rate up to 90 days before expiry to avoid those charges.
Do fixed rate loans include offset accounts?
Some fixed rate loans offer offset accounts, but they may not reduce interest during the fixed period or may be capped. Variable rate loans typically include full offset accounts at no extra cost, so check the features before choosing a fixed rate product.
What upfront fees do lenders charge on fixed rate loans?
Lenders typically charge application fees of $300 to $600, valuation fees, and sometimes rate lock fees of $300 to $750 if you want to secure the rate before settlement. Some lenders waive application fees or let you roll them into the loan amount.
What fees apply when I pay off a fixed rate loan early?
You'll pay a discharge fee of $150 to $400 plus any break costs if you're still within the fixed term. If you're close to the end of the fixed period, delaying settlement by a few weeks can save you thousands in break costs.
