Ongoing fees and charges

Many loans incorporate periodic (usually monthly) fees for the life of the loan. If a loan offers 'no monthly fees' but carries a slightly higher interest rate, it may not be immediately clear if the loan is actually better than a similar loan with a monthly fee but a lower interest rate or more features.

The ongoing costs you incur on your loan can also be affected by how you manage it, and prudent borrowers will ensure that they've chosen a loan with a fee structure to best suit their own circumstances.

For example the ability to redraw funds from the home loan (where extra repayments have been made) is a popular option with many people. One bank might charge borrowers $50 per year for the redraw facility, but let them redraw as often as they wish with no additional costs. Another bank might not charge the $50 annual fee, but might charge $10 per redraw. Others will charge nothing at all.

To accurately determine the best loan at the time of application, borrowers must have some idea of how they plan to manage the loan in the future.

Some of these costs must be paid upfront by the borrower while others can be added to the loan amount. But all fees will impact on the real cost of the loan, and less informed borrowers may get quite a shock when they become aware of the total amount of the 'extra' costs they hadn't budgeted for. Understanding the fees and charges is the first step towards choosing the best home loan.