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Most home loans come with their share of fees. Don’t fret over the length of this list, as you probably won’t be subject to all of them. You may even be able to convince your lender to nix a few.

It’s also not an exhaustive list as every lender has its own fee schedule.

Without further delay… your list of the most common home loan fees you might see:

Upfront fees

These are one-off upfront fees you may encounter at the beginning of the home loan process. They may include fees to your lender and to interested third-parties like the government and your solicitor.

Upfront lender fees

• Application fee. Also be called an establishment fee and it pays for the lender to organize your loan whether you settle or not. Some lenders will waive this fee.
• Valuation fee. Pays for a qualified independent valuer to assess your home’s value. Some application fees may cover this up to a certain amount, with you paying any difference.

Upfront government fees

• Stamp duty. A percentage of the total cost of your property, which goes to your state’s revenue department (percent varies by state). It’s more of a tax than a fee.
• Mortgage registration fee. Pays the state to register the purchased property as the security on the home loan.

Other upfront fees

• Conveyancing fees. Fees paid to your solicitor or conveyancer (if you choose to use one) to help you prepare and organise your contract.

Ongoing fees

These are regular, ongoing fees you may have to pay your lender throughout the life of your loan.

• Monthly service fees. A regular monthly account-keeping fee.
• Annual fees. A yearly fee that usually only applies to package home loans, which are home loans bundled with other financial products.

Exit fees

These are one-off fees you may have to pay when you pay off or close out your loan.

• Discharge fee. Also called a settlement fee, this applies when you close out your loan (ie, pay it off, sell your property or refinance).
• Early-repayment fee. A fee for paying your loan off early. It usually only applies to fixed rate loans but not variable rate loans.

Special fees

These are fees you might have to pay if you’re taking out a special type of loan, like a fixed-rate loan or low-deposit loan.

• Rate lock fee. A special fee to lock in your rate with a fixed-rate loan.
• Security guarantee fee. A special fee that applies when you have a guarantor on your loan.
• Lenders Mortgage Insurance (LMI). An insurance premium that applies when you take out a low-deposit loan (usually under 20% deposit).
• Redraw fees. Apply when you withdraw funds from a loan account that you’ve made extra repayments into.

Bottom line

Fees are a fact of life, especially for a financial product you’ll carry with you for a long time. It’s important to become familiar with this list before you start researching home loans. That way you won’t be caught off guard when you do come across these fees in your search and you’ll know what you’re talking about when it’s time to negotiate your loan terms.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

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When you get an interest-free loan, it’s always interest-free, right? Wait a second. It’s only interest-free if you toe the line with the terms and conditions of the loan. And research we commissioned has found nearly half (48%) of Kiwis have made the most of deferred interest deals to purchase items with what can be a ‘free’ loan, but even the best intentions of paying off the loan in time can catch some consumers out.

While most Kiwis paid off the loan within the interest free period, 12% did not complete the payments and paid interest on their purchase, the research shows.

For those 12%, almost half (47%) took more than a year to pay it back in full and ended up paying a significantly higher price for the item. And according to our analysis*, 18% of people with a personal loan have been overdue on monthly repayments at least once in the past 12 months.

Interest rates charged on store cards can be as high as 26% – higher than credit cards and personal loans from banks.

CreditSimple.co.nz spokesperson Hazel Phillips says paying off a hire-purchase interest-free deal on time is doubly positive: you avoid having to pay interest and it can help improve your credit score.

“Young people setting up their first house or flat often lean heavily on credit cards and interest-free deals to buy furniture and appliances. Our own data shows that missing a payment on a finance deal is one of the biggest factors impacting your credit score,” she says.

“A good credit score is 500 or more on a scale of 0 to 1,000.

“Falling behind in regular payments soon starts to affect your credit score. Some people get into the habit of paying as late as they can every time, but that’s not a good strategy. The reality is with banks now reporting ‘positive’ credit behaviour such as paying on time, late payers stand out.

“You may earn a few cents extra interest by delaying bill payments. But it’s just not worth it if it’s wrecking your credit score, as it can affect your ability to get credit down the track.”

*Drawn from data held by illion, Credit Simple’s parent company.

This research was conducted for Credit Simple by Perceptive Research in July 2017 surveying a minimum of 1,000 New Zealanders online using nationwide sampling framework, the results are then weighted to Statistics New Zealand census gender, age and location data.

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