Variable Rate Loan Fees and Costs for First Home Buyers

What You'll Pay with a Variable Interest Rate Home Loan

When you're buying your first home as an ADF member in South Australia, understanding the costs involved with a variable interest rate loan is crucial to setting your first home buyer budget. Unlike a fixed interest rate loan where your repayments stay the same for a set period, variable rate loans come with their own set of fees and considerations that can impact your finances.

Variable interest rate loans typically offer more flexibility than their fixed counterparts. You'll often get features like an offset account or redraw facility, which can help you pay off your first home loan faster. However, these benefits come with various costs that you should factor into your first home buyer checklist.

Upfront Costs When Applying for a Home Loan

Before you even move into your new property, there are several fees you'll encounter during your first home loan application process:

Application Fees: Some lenders charge an application or establishment fee, which can range from $0 to $1,000 or more. At Defence Loans, we work with lenders who understand the ADF lifestyle and often provide interest rate discounts and reduced fees for defence force members.

Valuation Fees: Lenders need to confirm your property's worth, and this valuation typically costs between $200 and $600. This fee ensures the property you're purchasing represents adequate security for the loan.

Lenders Mortgage Insurance (LMI): If you're using low deposit options like a 5% deposit or 10% deposit, you'll likely need to pay LMI. This insurance protects the lender if you can't make your repayments. The cost varies based on your deposit size and loan amount, potentially ranging from a few thousand to tens of thousands of dollars. However, ADF members may access No LMI Loans through certain lenders, which can save you considerably.

Legal and Conveyancing Fees: You'll need a solicitor or conveyancer to handle the property transfer, costing between $1,500 and $3,000 depending on the complexity of your purchase.

First Home Buyer Stamp Duty Concessions in South Australia

One advantage for first home buyers in SA is the availability of first home buyer stamp duty concessions. South Australia offers generous concessions or exemptions on stamp duty for eligible first home buyers, which can save you thousands of dollars. The eligibility criteria and concession amounts depend on the property value and whether you're purchasing an established home or building a new one.

Don't forget to check if you qualify for first home buyer grants like the first home owner grants (FHOG), which provides financial assistance when building or buying a new home. These grants can boost your deposit and reduce the amount you need to borrow.

Government Schemes That Can Help

As an ADF member looking at first home buyer eligibility, you have access to several government initiatives:

• First Home Loan Deposit Scheme: This allows eligible first home buyers to purchase a property with a smaller deposit without paying LMI
• Regional First Home Buyer Guarantee: If you're considering regional South Australia, this scheme may offer additional benefits
• First Home Super Saver Scheme: This lets you save for your deposit inside your superannuation fund, potentially with tax advantages

Getting pre-approval before you start house hunting helps you understand your borrowing capacity and demonstrates to vendors that you're a serious buyer.

Ongoing Costs with Variable Rate Loans

Once you've settled on your property, there are regular fees to consider:

Monthly Account Fees: Some variable rate loans charge monthly service fees between $10 and $30. Many lenders waive these fees as part of competitive packages for ADF members.

Offset Account Fees: While an offset account can reduce the interest you pay, some lenders charge annual fees ranging from $150 to $395 for this feature. However, the interest savings often outweigh the cost.

Redraw Fees: If your loan includes a redraw facility allowing you to access extra repayments, there might be a fee each time you make a withdrawal. This can be anywhere from $0 to $50 per transaction.

Features Worth Paying For

When comparing home loan options, consider which features align with your financial goals:

An offset account links to your home loan, and the balance in this account reduces the amount of interest you're charged. If you maintain a healthy balance in your offset account, the interest savings can far exceed any account fees.

A redraw facility lets you access any extra repayments you've made above your minimum requirement. This provides financial flexibility if unexpected expenses arise, though it's important to have discipline to avoid constantly dipping into these funds.

Many variable rate loans offer unlimited additional repayments without penalty, allowing you to pay off your mortgage faster when your budget allows.

Avoiding Unnecessary Fees

Some fees are avoidable with careful planning:

• Late Payment Fees: Set up direct debits to ensure your repayments are always on time
• Discharge Fees: These apply when you pay off your loan or refinance, typically costing $150 to $400
• Break Fees: Variable rate loans generally don't have break fees, which is one of their key advantages over fixed interest rate loans

Making Your First Home Loan Application Work

When you apply for a home loan, having all your documentation ready speeds up the process. Your first home loan application should include:

1. Proof of identity and ADF employment
2. Recent payslips and tax returns
3. Bank statements showing your savings pattern
4. Details of any gift deposit from family members
5. Information about your expenses and existing debts

If family members are helping with your deposit through a gift deposit, lenders typically require documentation confirming this is genuinely a gift and not a loan that needs to be repaid.

The Defence Loans Advantage for South Australian ADF Members

As ADF members in South Australia, you have access to specialised lending products that recognise your stable employment and unique circumstances. Working with a broker who understands defence force life means you'll get guidance on which lenders offer the most suitable home loan options for your situation.

We help you navigate everything from understanding buying your first home requirements to accessing 5% Deposit Scheme options specifically designed for ADF members.

Understanding variable rate loan fees and costs empowers you to make informed decisions about your first home purchase. While the fees might seem overwhelming initially, knowing what to expect helps you budget accurately and choose the right loan structure for your needs.

Call one of our team or book an appointment at a time that works for you to discuss your home loan options and start your journey towards homeownership.