Simple hacks to cut variable investment loan fees

Variable rate investment loans come with more than just the advertised interest rate.

Most investors compare loans by looking at the rate, sometimes the offset features, and occasionally the ability to switch between interest-only and principal-and-interest repayments. The monthly account fee, the annual package fee, the settlement fee, the valuation cost, and the discharge fee rarely make it into the comparison until you are reading the loan offer. By then, you have already committed time to the application. Switching lenders at that stage feels like starting over, so most people accept the fees and move on. That decision can cost you several thousand dollars over the life of the loan, and in some cases it changes whether the investment makes sense at all.

This article walks through the fees and costs attached to variable rate investment loans in NSW, what they mean in dollar terms, and where you can push back or structure around them.

What fees apply when you first take out a variable investment loan

You will pay an application fee, a valuation fee, and in most cases a settlement fee when you first take out a variable investment loan.

Application fees range from zero to around $600 depending on the lender and the package. Some lenders waive the application fee if you are borrowing above a certain threshold or refinancing an existing portfolio to them. Valuation fees depend on the property type and location. A standard residential property in Sydney or the Central Coast will usually cost between $200 and $400 to value. If you are buying a property in a regional area or a property with commercial zoning, rural land, or a large acreage, the valuation fee can climb to $800 or more. Settlement fees sit between $200 and $600 and cover the lender's cost to register the mortgage and disburse funds. Some lenders roll settlement into an establishment fee. Others charge both. A handful of lenders, particularly the smaller non-bank lenders, charge no upfront fees at all but price the cost into a slightly higher interest rate instead.

Consider an investor refinancing two properties in the Hornsby area to consolidate debt and release equity for a third purchase. One lender quoted a $350 application fee, two valuations at $300 each, and a $600 settlement fee per property. The total upfront cost was $2,150 before legal fees or lenders mortgage insurance. A second lender waived the application fee for loans above $500,000, charged $250 per valuation, and had no settlement fee. The saving was $1,050, which covered most of the conveyancing cost on the new purchase. Both lenders offered the same interest rate and offset facility. The only material difference was fee structure.

Ongoing account fees and package fees on variable investment loans

Most variable investment loans charge a monthly account fee, and if you hold a package loan, an annual package fee as well.

Monthly account fees range from zero to around $15 per loan account. Over a year, that is $180 per property. If you hold three investment properties, you are paying $540 annually just to maintain the accounts. Annual package fees typically sit between $300 and $400 and give you access to discounted interest rates, offset accounts, and sometimes fee waivers on credit cards or transaction accounts. The package fee is worthwhile if the rate discount is large enough to offset the fee. A 0.30 per cent rate discount on a $600,000 loan saves you $1,800 a year in interest. After paying the $395 package fee, you are still $1,405 better off. On a $300,000 loan, the same discount saves $900, and after the package fee you are only $505 ahead. At that point, a no-package loan with a slightly higher rate but no annual fee can work out cheaper.

In our experience, investors with multiple properties often end up paying package fees on each loan without checking whether the total fee cost is justified by the combined rate discount. If you hold four properties and each loan carries a $395 package fee, you are paying $1,580 a year before you account for monthly account fees. Some lenders cap package fees across multiple loans. Others do not. That distinction matters when you are building a portfolio.

Lenders mortgage insurance and how it is calculated on investment loans

Lenders mortgage insurance is required on most investment loans where the loan-to-value ratio exceeds 80 per cent.

LMI protects the lender, not you, but you pay the premium. The premium is calculated based on the loan amount and the LVR, and it increases sharply above 85 per cent LVR. Investment loans attract higher LMI premiums than owner-occupied loans at the same LVR because the lender's capital requirement under the prudential framework is higher for investor lending. A $500,000 investment loan at 85 per cent LVR might carry an LMI premium of around $8,000 to $10,000. The same loan at 90 per cent LVR could attract a premium above $15,000. Some lenders allow you to capitalise the LMI premium into the loan, which means you do not pay it upfront but you do pay interest on it for the life of the loan. Other lenders require the premium to be paid at settlement.

If your deposit sits just below the 20 per cent threshold, it is worth running the numbers on whether a small top-up from savings, a guarantor, or equity from another property can get you over 80 per cent LVR and avoid LMI altogether. On a $500,000 purchase, the difference between an 85 per cent loan and an 80 per cent loan is $25,000 in additional deposit, but the LMI saving is close to $9,000. If you have access to that $25,000 without selling other investments or triggering a taxable event, the LMI saving alone justifies the higher deposit.

Variable rate discounts and how they change over time

The interest rate you are offered on a variable investment loan is usually expressed as a discount off the lender's standard variable rate.

That discount is not locked in. Lenders can and do reduce the discount over time, particularly for borrowers who took out loans several years ago and have not refinanced. The standard variable rate might move in line with the Reserve Bank cash rate, but your discount can shrink independently. A borrower who started with a 0.90 per cent discount in previous years might now be sitting on a 0.50 per cent discount without realising it, because the lender has only communicated changes to the standard rate, not to the discount itself. Over time, that erosion can cost thousands of dollars a year.

We regularly see this with clients who refinance after holding a loan for three or more years. The original discount has been quietly wound back, and by the time they come to us, they are paying 0.40 to 0.60 per cent more than a new borrower would pay for the same product. On a $700,000 loan, a 0.50 per cent difference is $3,500 a year. That is enough to justify a refinance even after accounting for discharge fees and settlement costs on the new loan.

Discharge fees, settlement costs, and break costs when refinancing or selling

When you refinance or sell an investment property, you will pay a discharge fee to your current lender and settlement costs to the new lender if you are refinancing.

Discharge fees range from $150 to $400 per loan. If you are refinancing three properties, that is $450 to $1,200 in discharge costs alone. Settlement costs on the new loan follow the same structure as the initial loan - valuation, settlement fee, and sometimes an application fee. Break costs do not apply to variable rate loans. They only apply to fixed rate loans, and only if you repay or refinance during the fixed period. Variable investment loans can be refinanced or discharged at any time without penalty beyond the discharge fee.

Some lenders offer refinance rebates that cover part or all of the upfront costs on a new loan. These rebates are usually available for a limited time and are marketed to attract portfolio investors. If you are refinancing multiple properties, the rebate can cover the cost of valuations and settlement across the entire portfolio, which makes the switch cost-neutral in the first year. The rebate is typically paid after settlement and may be subject to clawback if you refinance again within 12 to 24 months.

Offset accounts, redraw facilities, and the fees attached to each

Most variable investment loans offer either an offset account or a redraw facility, and some offer both.

An offset account is a transaction account linked to your loan. The balance in the offset account reduces the loan balance on which interest is calculated, but it does not reduce the loan amount for LVR purposes under the prudential framework. Offset accounts on investment loans do not usually attract monthly fees if you hold a package loan, but they do if you do not. A $10 monthly fee on an offset account adds $120 a year. If you are not keeping a meaningful balance in the offset, you are paying for a feature you are not using. Redraw facilities allow you to withdraw any extra repayments you have made above the minimum. Most lenders do not charge for redraws on investment loans, but some charge between $50 and $100 per redraw transaction. If you plan to use redraw regularly to manage cash flow across your portfolio, that fee structure makes the facility impractical.

From a tax perspective, offset accounts offer more flexibility than redraw for investors. Funds in an offset account remain separate from the loan, so if you later withdraw money for a private purpose, you do not muddy the deductibility of the loan interest. Redraw, on the other hand, involves withdrawing money that has already been used to reduce the loan balance, which can complicate your tax position if the withdrawal is not used for investment purposes. That difference does not show up in the fee schedule, but it can matter when your accountant is preparing your return.

How serviceability buffers and debt-to-income limits affect borrowing capacity and loan costs

Lenders assess your ability to service a variable investment loan by applying a buffer of at least 3.0 percentage points above the loan interest rate.

If the interest rate on offer is 6.20 per cent, the lender will assess whether you can afford repayments at 9.20 per cent. That buffer has been in place since late 2021 and directly affects how much you can borrow. For investors with multiple properties or high existing debt, the buffer can reduce borrowing capacity to the point where even a small increase in the loan amount pushes the application outside serviceability. From February 2026, lenders have also been required to limit the proportion of new investor loans they write to borrowers with a debt-to-income ratio of six times or greater. The limit is 20 per cent of new investor lending per lender per quarter. If you have a total debt level of six times your gross income or more, you may find some lenders decline your application or require a larger deposit, even if you can demonstrate capacity to service the loan.

These settings do not directly add a fee or cost to your loan, but they can force you into a higher LVR bracket or require you to add a guarantor, both of which carry costs. A guarantor arrangement usually requires a separate legal certificate for the guarantor, which costs between $200 and $500. If the guarantor requirement pushes your application into a different lender's policy, you may also face a higher interest rate or a different fee structure.

Call one of our team or book an appointment at a time that works for you. We will run your scenario across the lenders we work with, compare the full cost structure, and work out where the actual value sits once fees, LMI, and rate discounts are all on the table.

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