Understanding the Fees and Costs of Fixed Rate Investment Loans

Fixed rate investment loans look clean on a rate sheet, but the real cost sits in a handful of fees that vary significantly between lenders.

Most lenders charge an application fee, a valuation fee, and ongoing monthly account-keeping fees. Some add exit fees if you pay out the loan early. The difference between a lender with low upfront costs and high exit penalties versus one that front-loads fees can change which product makes sense depending on how long you plan to hold the rate.

What You Pay Upfront When Fixing an Investment Loan

Application fees range from zero to around $600. Most non-bank lenders have dropped them entirely. Valuation fees are usually between $200 and $400, though some lenders roll this into the loan amount rather than requiring payment upfront. Settlement fees sit around $150 to $300.

Consider an investor buying a second property in Mount Eliza who fixes the rate on a $650,000 loan. One lender quotes no application fee, a $300 valuation, and a $200 settlement fee. Another charges a $600 application fee, waives the valuation, and adds a $250 settlement charge. The first lender costs $500 upfront, the second $850. That $350 difference matters when you're managing cash flow across multiple properties, particularly if you're also covering stamp duty and body corporate setup fees in the same settlement period.

Monthly Account Fees and How They Add Up

Most fixed rate investment loans carry a monthly account-keeping fee between $10 and $15. Over a three-year fixed term, that adds between $360 and $540 to the total cost of the loan.

Some lenders waive this fee for loans above a certain size or for clients with multiple facilities. Others charge it regardless of loan amount. If you're fixing only part of your facility and leaving the rest on a variable rate, you may be charged two separate account fees. In a scenario where an investor splits a $700,000 loan into $400,000 fixed and $300,000 variable, they could be paying $20 to $30 per month in combined fees, which over three years reaches $720 to $1,080. That ongoing cost is worth factoring in when you're calculating whether the rate saving justifies the fix.

Break Costs and When They Apply

If you pay out a fixed rate loan early, most lenders will charge a break cost. This fee compensates the lender for the difference between the rate they locked in when they funded your loan and the rate they can now lend that money at.

Break costs are calculated using the remaining loan balance, the remaining term, and the movement in wholesale interest rates since you fixed. If rates have dropped since you locked in, the break cost can be substantial. If rates have risen, the break cost may be zero or even result in a small rebate. We regularly see break costs ranging from a few hundred dollars to tens of thousands, depending on how much the market has moved and how much time is left on the fixed term. If you're planning to sell the Mount Eliza property or refinance before the fixed term ends, a lender with a lower break cost formula or a shorter fixed term may be worth considering, even if the rate itself is slightly higher.

Package Fees and Annual Charges for Investors

Some lenders bundle fixed rate investment loans into a package that includes fee waivers, rate discounts, and access to offset accounts or redraw on the variable portion of your loan. These packages typically cost between $300 and $400 per year.

Whether the package makes sense depends on how much you save in waived fees and whether the rate discount offsets the annual charge. If the package waives application fees, valuation fees, and settlement fees across multiple loans, and gives you a 0.10% to 0.20% rate discount, the annual fee can pay for itself within the first year. If you're only holding one fixed rate loan with no offset and no other facilities, the package fee may add cost without delivering value. Understanding your borrowing capacity across multiple properties helps determine whether a package structure makes sense for your portfolio.

Switching Costs If You Refinance

Refinancing a fixed rate investment loan before the term ends triggers break costs, discharge fees from your existing lender, and a full set of application and settlement fees with the new lender.

Discharge fees are usually between $300 and $500. Add that to break costs, a new valuation, a new application fee, and settlement costs with the new lender, and the total cost of refinancing a fixed rate loan can easily reach $2,000 to $5,000 or more, depending on market conditions. If you're refinancing because rates have dropped and you want to lock in a lower fixed rate, the break cost might outweigh the benefit of the new rate. If you're refinancing to access equity for another purchase, the cost becomes part of the broader investment strategy rather than a standalone decision.

How to Compare Costs Across Lenders

Add up every fee over the full fixed term. Include upfront costs, multiply the monthly account fee by the number of months, add any package fees, and factor in the likely exit scenario.

If you plan to hold the property long-term and ride out the fixed term, break costs won't matter. If you're building a portfolio and expect to refinance within two years to access equity, a lender with lower break costs or more flexible exit terms may deliver lower total costs even if the rate is slightly higher. In our experience, investors who focus only on the interest rate often end up paying more once fees and exit costs are included. The lender with the lowest advertised rate isn't always the one that costs the least over the life of the loan.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structures across the lenders we work with and show you which combination of rate and costs suits your investment timeline.

Frequently Asked Questions