Do You Know Variable Rate Loan Fees Add Up Fast?

Variable rate loans give you the flexibility to make extra repayments and access features like offset accounts, but they also come with a range of fees and costs that need to be factored into your budget from day one.

As a periodontist considering your first property purchase, you're likely weighing up the trade-off between rate flexibility and the total cost of borrowing. The structure of variable rate loans means you're not just paying interest on what you borrow. There are upfront fees, ongoing account fees, and potential costs if you need to exit or switch lenders down the track. Understanding these charges before you apply helps you compare options accurately and avoid surprises at settlement.

What Upfront Costs Should You Expect on a Variable Rate Loan?

Upfront costs typically include application fees, valuation fees, and settlement fees. Application fees can range from zero to around $600 depending on the lender, while valuation fees usually sit between $200 and $400. Settlement fees, which cover the lender's administrative costs when the loan is finalised, can add another $150 to $300.

If you're borrowing with less than a 20% deposit, you'll also need to budget for Lenders Mortgage Insurance. This protects the lender if you default, and the cost depends on your loan size and deposit amount. For periodontists, some lenders offer LMI waivers for dentists which can reduce or eliminate this cost entirely, even with a smaller deposit. That can save you several thousand dollars at settlement.

Consider a periodontist buying in a regional centre with a 10% deposit. Even with an LMI waiver, they'd still need to cover application, valuation, and settlement fees, plus legal costs and any government charges. Budgeting an extra few thousand dollars beyond your deposit ensures you're not scrambling at the last minute.

How Do Ongoing Account Fees Work on Variable Rate Loans?

Most variable rate loans charge an annual account fee, typically between $250 and $400 per year. This fee covers the cost of maintaining your loan account and providing access to features like online banking, redraw facilities, and offset accounts. Some lenders waive this fee for the first year or for professional borrowers, but it's worth confirming upfront.

If you're using an offset account to reduce interest, check whether the lender charges a separate fee for that feature. Some lenders include it in the annual account fee, while others add an extra $10 to $20 per month. Over the life of a loan, these smaller charges add up, so compare the total cost rather than just the interest rate.

In our experience, periodontists who are setting up their first property often overlook these ongoing costs when comparing loan options. A loan with a slightly higher interest rate but no annual fee might actually cost less over time than a loan with a lower rate and a $400 annual charge, depending on your loan size and how long you plan to hold the property.

What About Discharge and Exit Fees?

Discharge fees apply when you pay off your loan or switch lenders. These typically range from $150 to $400 and cover the lender's administrative costs to close your account and release the property title. Not all lenders charge a discharge fee, so if you think you might refinance within a few years, it's worth choosing a loan without one.

Some lenders also charge an exit fee if you close your loan within the first few years, though this is less common with variable rate products than with fixed rate loans. If you're planning to refinance or sell within a short timeframe, check the loan terms carefully before you apply.

How Should You Compare Total Loan Costs?

The comparison rate is designed to help you compare the total cost of different loan products by including both the interest rate and most standard fees. It's expressed as a single percentage and gives you a more accurate picture of what you'll actually pay than the advertised interest rate alone.

However, comparison rates are calculated on a standard loan amount and term, so they don't always reflect your individual circumstances. If you're borrowing a different amount, using an offset account, or planning to make extra repayments, the actual cost might differ. Use the comparison rate as a starting point, then ask your broker to calculate the total cost based on your specific situation.

For periodontists with variable income from private practice work, it's also worth considering how features like redraw and offset accounts affect the total cost. An offset account that reduces your interest by a few hundred dollars each month can more than cover the annual account fee, especially if you're holding surplus cash between billing cycles.

Should You Negotiate Fees When Applying?

Many lenders will reduce or waive certain fees if you ask, particularly for professional borrowers like periodontists. Application fees are often negotiable, and some lenders will waive the annual account fee for the first year or longer if you're borrowing a larger amount.

Your broker can often negotiate fee waivers or discounts on your behalf, especially if you're using home loans for dentists that offer specific benefits for dental professionals. Even saving a few hundred dollars upfront gives you more flexibility with your settlement budget, and waiving the annual fee can save you thousands over the life of the loan.

If you're also looking at getting loan pre-approval, confirming which fees apply and which can be waived should be part of that process. Locking in those concessions at the pre-approval stage means you know exactly what you'll pay when it's time to settle.

Variable Rate Loans and Buying Your First Home as a Periodontist

Variable rate loans work well for first home buyers who want flexibility and expect their income to increase over time. As a periodontist, you're likely to see your earnings grow as you build your patient base or take on additional consulting work. A variable rate loan lets you make extra repayments when you have surplus cash, which reduces your interest and shortens your loan term.

The key is to factor in all the costs upfront so you're comparing options on a like-for-like basis. A loan with a lower interest rate but higher fees might cost more over time than a loan with a slightly higher rate and fewer charges. Your broker can run the numbers based on your specific borrowing amount and expected repayment behaviour to show you which option delivers the most value.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structures of different lenders, identify which costs can be reduced or waived, and help you choose a variable rate loan that fits your budget and your plans for the property.

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