Fixed rate loans come with specific fees that variable rate loans do not charge. You will pay application fees, valuation costs, and in some cases break costs if you exit the fixed term early. These costs vary depending on the lender and the length of the fixed period you choose.
As a community pharmacist buying your first home, the decision between fixed and variable rates affects more than just your monthly repayment. It affects the costs you pay upfront, the flexibility you have during the loan term, and the amount you might owe if circumstances change. Knowing what you are paying for before you commit matters.
Application and Establishment Fees on Fixed Rate Loans
Most lenders charge an application or establishment fee for processing a fixed rate home loan. This fee generally sits between $300 and $600, though some lenders waive it entirely as part of promotional offers. The fee covers the administrative work involved in setting up your loan, including credit assessment and documentation.
The fee is usually deducted from the loan amount at settlement rather than paid upfront in cash. That means it gets added to your total borrowing and you pay interest on it over the life of the loan. If you are applying through the Australian Government 5% Deposit Scheme, check whether your chosen participating lender charges this fee and whether it can be capitalised into the loan amount. Not all lenders charge the same amount, and some participating lenders offer reduced or zero establishment fees for first home buyers using the scheme.
In our experience, pharmacists often compare rates between lenders but overlook the fee structure. A lender offering a slightly lower fixed rate may charge a higher application fee, which can offset some of the interest savings over the first year.
Valuation Costs and How They Apply
Every lender requires a property valuation before approving your loan. The valuation confirms that the property you are buying is worth the amount you are borrowing against it. Most lenders charge between $200 and $400 for this service, depending on the property location and type.
For a property purchased under the 5% Deposit Scheme, both the purchase price and the lender's assessed valuation must meet the applicable price cap for your location. If the valuation comes in below the purchase price, you may need to renegotiate the sale or increase your deposit to cover the shortfall. The valuation fee is payable regardless of the outcome, and you will not receive a refund if the lender declines the application based on the valuation result.
Some lenders include the valuation fee in the overall establishment cost. Others bill it separately. Ask your broker or lender to confirm whether the valuation fee is included in the quoted costs or charged as an additional line item at settlement.
Fixed Rate Lock Fees and Rate Lock Periods
When you apply for a fixed rate loan, you do not lock in the rate automatically. Most lenders allow you to formally lock the rate once your application is conditionally approved, and this lock typically lasts between 60 and 90 days. If settlement occurs after the lock period expires, the rate may revert to the lender's current fixed rate at that time, which could be higher or lower.
Some lenders charge a rate lock fee, usually between $300 and $750, to secure the fixed rate for the agreed period. Other lenders offer rate locks at no additional cost. Whether a fee applies depends on the lender's policy and the length of the lock period you request. A 90-day lock may attract a higher fee than a 60-day lock, or it may not be offered at all by certain lenders.
Consider a buyer who applies for a fixed rate loan in early October with an expected settlement in mid-December. They lock the rate for 90 days at the time of conditional approval. If settlement is delayed and occurs in January, the lock has expired and the buyer will need to accept the lender's current fixed rate at that time. If rates have risen in the interim, the buyer pays more than anticipated over the life of the loan. If they have paid a non-refundable lock fee and the rate moves against them, that fee becomes a sunk cost with no benefit.
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Break Costs and When They Apply
Break costs are the penalty a lender charges if you exit a fixed rate loan before the fixed term ends. They apply when you sell the property, refinance to another lender, or make a repayment above the allowable annual limit during the fixed period. The lender calculates break costs based on the difference between the fixed rate you are paying and the current wholesale rate the lender can earn by reinvesting the funds.
If current rates have fallen since you fixed your loan, break costs can be substantial. If rates have risen, break costs may be zero. The calculation is complex and depends on the remaining term of your fixed period, the size of your loan, and the movement in wholesale rates since you locked in your rate.
Most lenders allow you to make additional repayments up to a certain limit each year without triggering break costs. This limit is typically between $10,000 and $30,000 per year, depending on the lender. If you receive a bonus, tax refund, or other lump sum and want to pay down your loan, check your loan terms to confirm how much you can repay without penalty. Some lenders allow additional repayments only on the variable portion of a split loan, not on the fixed portion.
Ongoing Account Fees During the Fixed Period
Most fixed rate loans charge a monthly account-keeping fee, typically between $10 and $15 per month. This fee applies for the life of the loan unless the lender waives it as part of a package or professional discount. Over a 30-year loan term, a $10 monthly fee adds up to $3,600 in total.
Some lenders offer fixed rate loans with no ongoing monthly fee but charge a higher upfront establishment cost. Others waive the monthly fee if you hold other products with the same lender, such as a transaction account or credit card. Pharmacists with access to professional loan packages may be eligible for reduced or zero monthly fees depending on the lender and the package terms. Check whether your employment status qualifies you for these discounts when comparing loan options.
Settlement and Legal Costs Separate from Loan Fees
Settlement costs are not charged by the lender but are payable as part of completing the purchase. These include conveyancing or solicitor fees, title search fees, and government registration charges. Conveyancing fees typically range from $1,200 to $2,500 depending on the complexity of the transaction and whether the property is in a strata scheme or has other encumbrances.
You will also pay stamp duty unless you qualify for a full concession or exemption under your state or territory scheme. New South Wales offers a full transfer duty exemption on homes valued up to $800,000 for eligible first home buyers purchasing new or established homes. Victoria offers a full exemption on properties valued up to $600,000 and a concession on properties between $600,001 and $750,000. Queensland provides a first home concession that reduces duty on established homes and eliminates duty entirely on eligible new homes and vacant land purchases from 1 May 2025. Each state has different thresholds and eligibility rules, so confirm your entitlement before budgeting for settlement.
If you are using a low deposit loan or accessing the 5% Deposit Scheme, your deposit may cover only a small portion of the purchase price, which means your borrowing includes most of the settlement costs. Budget for these costs separately and confirm with your conveyancer the total amount you will need to pay at settlement in addition to your deposit.
Lenders Mortgage Insurance and How It Affects First Home Buyers
If you borrow more than 80% of the property value, most lenders require you to pay Lenders Mortgage Insurance. LMI protects the lender if you default on the loan. It does not protect you. The cost of LMI varies depending on the size of your deposit and the loan amount, but it can range from a few thousand dollars to over $20,000 for a 5% deposit on a property at the higher end of the price spectrum.
Under the Australian Government 5% Deposit Scheme, LMI is not charged because Housing Australia guarantees the difference between your deposit and 20% of the property value. This can save you several thousand dollars compared to a standard low deposit loan outside the scheme. If you do not qualify for the scheme or prefer to borrow through a lender that is not a participating lender, you will pay LMI on any loan above 80% of the property value unless you access a professional LMI waiver available to pharmacists through certain lenders.
LMI is usually added to the loan amount rather than paid in cash at settlement. That means you pay interest on it over the life of the loan. On a fixed rate loan, the LMI premium is factored into your total borrowing, and you are locked into paying interest on that amount at the fixed rate for the duration of the fixed term.
Redraw Restrictions and Offset Limitations on Fixed Loans
Most fixed rate loans do not allow you to link an offset account. An offset account is a transaction account linked to your home loan where the balance offsets the loan principal for interest calculation purposes. Offset accounts are more commonly available on variable rate loans. If you fix your entire loan amount, you will not have access to this feature unless you choose a split loan structure with part of the loan on a variable rate.
Some fixed rate loans offer a redraw facility, which allows you to withdraw any additional repayments you have made above the minimum required amount. However, redraw on fixed loans is often restricted. You may be limited to one or two redraws per year, and some lenders charge a fee of $50 to $100 per redraw transaction. If you anticipate needing access to additional funds during the fixed period, confirm the redraw terms before committing to the loan.
A split loan structure, where part of your borrowing is fixed and part is variable, allows you to access an offset account and more flexible repayment options on the variable portion while still locking in a portion of your loan at a fixed rate. This structure may involve two separate sets of fees, one for the fixed portion and one for the variable portion, so check the total cost before deciding which structure suits your circumstances. You can read more about refinancing options for pharmacists if you want to adjust your loan structure after settlement.
Call one of our team or book an appointment at a time that works for you. We will walk through the costs that apply to your situation, confirm what is included in the loan structure you are considering, and help you compare options that fit your budget and your plans for the property.
Frequently Asked Questions
What upfront fees do I pay on a fixed rate home loan?
Most lenders charge an application or establishment fee between $300 and $600, plus a valuation fee of $200 to $400. Some lenders also charge a rate lock fee if you want to secure the fixed rate before settlement.
Do I pay break costs if I sell my home during the fixed term?
Yes, break costs apply if you exit a fixed rate loan before the fixed period ends, including when you sell the property or refinance. The amount depends on the difference between your fixed rate and the lender's current wholesale rate.
Can I use an offset account with a fixed rate loan?
Most fixed rate loans do not offer an offset account. If you want offset functionality, you will need to choose a split loan structure with part of your borrowing on a variable rate.
Is Lenders Mortgage Insurance required on a fixed rate loan with a 5% deposit?
If you borrow through the Australian Government 5% Deposit Scheme, LMI is not charged. Outside the scheme, LMI applies to any loan above 80% of the property value unless you qualify for a professional LMI waiver.
What ongoing fees apply during the fixed rate period?
Most lenders charge a monthly account-keeping fee of $10 to $15. Some lenders waive this fee as part of a professional package or promotional offer, so check your eligibility before committing.
