Fixed rate loans come with upfront costs and exit fees that can catch first home buyers off guard if they are not planned for.
Most lenders charge an establishment fee of around $600 for any new home loan, and some charge an additional fixed rate lock fee of $300 to $750 to secure your rate before settlement. If you need to break the fixed term later, break costs can run into thousands of dollars depending on how far rates have moved. For orthodontists entering the property market, understanding these fees upfront makes it possible to compare loans accurately and avoid surprises down the line.
Fixed Rate Lock Fees and When They Apply
A fixed rate lock fee is charged by some lenders to hold an interest rate for you between pre-approval and settlement. This fee typically ranges from $300 to $750 and is payable at the time you lock in your rate, not when the loan settles. Not all lenders charge this fee, so if you are comparing fixed rate offers, check whether the lock fee is waived or included.
Consider an orthodontist purchasing in a regional area using the First Home Guarantee with a 5% deposit. They receive pre-approval with a fixed rate of 6.2% and lock it in for 90 days while the contract settles. The lender charges a $600 lock fee on top of the standard $600 establishment fee. That is $1,200 in upfront costs before a single repayment is made. If settlement is delayed beyond the lock period, the rate may expire and the fee is not refunded, so timing matters.
Establishment Fees and Application Costs
Most lenders charge an establishment fee of $600, though some waive it as part of a professional package for orthodontists or other health professionals. This fee covers the administrative cost of setting up your loan and is either capitalised into the loan amount or paid at settlement.
If you are using a low deposit option such as the expanded First Home Guarantee with a 5% deposit, the establishment fee is often rolled into the loan. That means you are borrowing slightly more and paying interest on the fee over the life of the loan. A $600 fee capitalised at a 6% fixed rate over 30 years adds roughly $1,200 in total interest, so it is worth asking whether the lender will waive it or whether you should pay it upfront.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Home Loans for Dentists today.
Break Costs on Fixed Rate Loans
Break costs apply when you exit a fixed rate loan before the fixed term ends. The amount is calculated based on the difference between your fixed rate and the lender's current wholesale cost of funds for the remaining fixed period. If rates have fallen since you fixed, you will likely pay break costs. If rates have risen, the break cost may be zero or the lender may even pay you a small credit.
In our experience, orthodontists who fix for three to five years and then need to refinance or sell within the first two years are the ones who face the largest break costs. A common scenario involves an orthodontist who fixes at 5.8% for five years, then decides to upgrade or relocate after 18 months when the market rate has dropped to 5.2%. The lender calculates the break cost based on the 0.6% rate difference over the remaining 42 months, which can result in a bill of $8,000 to $15,000 depending on the loan size.
Some lenders allow partial breaks or offer portability, which lets you take your fixed rate loan to a new property without triggering break costs. If you think there is any chance you will move, upsize, or refinance within the fixed period, ask your broker which lenders offer portability before you lock in.
Comparing Fixed and Variable Rate Costs
Fixed rate loans do not allow offset accounts in most cases, which means you lose the ability to reduce interest by parking savings against your loan. Variable rate loans typically include an offset account at no extra cost, and they do not charge break fees if you refinance or repay early.
For an orthodontist in their first year of practice with irregular income or partnership buy-in plans on the horizon, a variable rate or split loan structure often makes more sense. You can fix a portion for stability and keep the rest variable with an offset account for flexibility. This structure avoids locking your entire loan into a product that penalises you for changing circumstances.
Valuation Fees and Lenders Mortgage Insurance
Most lenders charge a valuation fee of $200 to $300 to assess the property before approving your loan. This fee is separate from the establishment fee and is usually payable at application or settlement.
If you are borrowing with less than a 20% deposit and are not eligible for the First Home Guarantee, you will also need to pay Lenders Mortgage Insurance (LMI). LMI premiums vary by loan size and deposit amount, but for a loan of $500,000 with a 10% deposit, expect to pay around $10,000 to $15,000 in LMI. Some lenders offer LMI waivers for dentists and orthodontists as part of a professional package, which can save tens of thousands of dollars. If you qualify for the First Home Guarantee, LMI is waived entirely even with a 5% deposit, which is why that scheme is so valuable for orthodontists buying your first home.
Settlement Costs Beyond the Loan
Beyond loan fees, first home buyers need to budget for conveyancing, building and pest inspections, and stamp duty. Conveyancing fees typically range from $1,200 to $2,500 depending on the state and property type. Building and pest inspections cost around $500 to $800 combined.
Stamp duty is the largest non-loan cost, but most states offer concessions or exemptions for first home buyers. In Victoria, eligible buyers pay no stamp duty on properties up to $600,000 and reduced duty up to $750,000. In New South Wales, the exemption applies under $800,000 for established homes and under $350,000 for vacant land. Queensland offers a full concession on new homes from May 2025, and South Australia abolished stamp duty entirely for first home buyers purchasing new homes. If you are applying for a home loan in one of these states, the saving can be $20,000 or more, which makes a material difference to your upfront budget.
Planning Your Cash Reserve
Once you account for loan fees, settlement costs, and any LMI premium, the total upfront expense can exceed your deposit by $15,000 to $25,000. Lenders assess your ability to cover these costs through genuine savings, which means funds held in your name for at least three months. Gifted deposits are acceptable under most loan policies, but the lender will want to see evidence that the gift is not a loan that needs to be repaid.
If you are close to the savings threshold, consider using the First Home Super Saver Scheme to boost your deposit. You can contribute up to $15,000 per financial year into superannuation at a 15% tax rate and withdraw up to $50,000 for your first home deposit. For an orthodontist on a marginal tax rate of 37% or higher, the tax saving alone can add $5,000 to $10,000 to your deposit over two years.
If your cash reserve is tight and you are considering a fixed rate loan, check whether the lender allows you to capitalise all fees into the loan amount. This reduces the cash you need at settlement but increases your loan balance and your LMI premium if applicable. Run the numbers with your broker to see which approach leaves you in a stronger position.
Call one of our team or book an appointment at a time that works for you to review your fixed rate loan options and build a cost breakdown tailored to your deposit, location, and practice stage.
Frequently Asked Questions
What fees do lenders charge on fixed rate home loans for first home buyers?
Most lenders charge an establishment fee of around $600, and some charge a fixed rate lock fee of $300 to $750 to hold your rate until settlement. Valuation fees of $200 to $300 also apply, and if you are borrowing with less than 20% deposit outside the First Home Guarantee, you will pay Lenders Mortgage Insurance.
What are break costs on a fixed rate loan and when do they apply?
Break costs are charged when you exit a fixed rate loan before the fixed term ends. The amount depends on the difference between your fixed rate and the lender's current wholesale cost of funds for the remaining period. If rates have fallen since you fixed, break costs can be substantial, often $8,000 to $15,000 or more.
Can orthodontists get LMI waived on a first home loan with a low deposit?
Yes, some lenders offer LMI waivers for orthodontists and other dental professionals as part of a professional package, even with a deposit as low as 10%. Alternatively, the First Home Guarantee waives LMI entirely for eligible buyers with a 5% deposit.
Should I fix my entire home loan or split between fixed and variable?
Splitting your loan between fixed and variable gives you rate certainty on part of the loan while keeping access to an offset account and avoiding full break costs if you need to refinance. For orthodontists with irregular income or plans to move, a split structure often provides more flexibility.
How much cash do first home buyers need beyond the deposit?
Beyond your deposit, budget for loan establishment fees, valuation, conveyancing, building and pest inspections, and stamp duty if applicable. The total can be $15,000 to $25,000 or more depending on the state and property price, though first home buyer concessions can reduce stamp duty significantly.
