Common Mistakes with Fixed Rate Investment Loan Costs

Fixed rate investment loans charge fees differently to variable rate products, and the structure of those costs changes depending on whether you lock in your rate for two years or five.

Many registered nurses building a property portfolio outside their primary residence assume the advertised rate captures the full cost. It doesn't. Application fees, ongoing account fees, offset restrictions, and break costs on early exit or refinance can add thousands to the total outlay, particularly where the loan runs interest-only or you need access to equity partway through the fixed term.

What Application and Settlement Fees Apply to Fixed Rate Investment Loans

Application fees on fixed rate investment loans range from zero to around $600 depending on the lender. Settlement fees, sometimes called establishment fees, sit between $150 and $350. Some lenders bundle these into a single upfront charge, others itemise them separately. Where the loan amount exceeds 80 percent LVR, Lenders Mortgage Insurance applies, and that premium is calculated on the full loan amount before any fee capitalisation. Adding upfront fees to the loan increases the amount on which LMI is charged.

Consider a nurse purchasing a two-bedroom unit as an investment property with a 15 percent deposit. The loan amount sits just under the 80 percent threshold before fees are added. Application and settlement fees of $800 push the total borrowing above that line, triggering an LMI premium that wouldn't otherwise apply. The marginal cost in this scenario isn't the $800 in fees but the additional premium on top.

How Ongoing Account Fees Are Structured on Fixed Rate Products

Fixed rate investment loans typically charge a monthly account fee of $10 to $15, which annualises to between $120 and $180. Some lenders waive this fee for package loans, but package loans carry their own annual fee, usually $300 to $400. The package fee may be worth paying if it unlocks a rate discount or fee waivers on other products, but it rarely makes sense for a single investment loan held in isolation.

Variable rate loans with offset accounts often include higher monthly fees or require the borrower to hold a package. Fixed rate loans generally don't offer offset accounts at all, so the comparison isn't direct. Where a lender does allow offset on a fixed rate investment loan, expect restrictions on partial or full offset functionality and a higher monthly cost than the equivalent variable product.

Fixed Rate Break Costs and How They're Calculated

Break costs apply when you repay a fixed rate loan in full before the end of the agreed term. The cost reflects the lender's funding loss from the early exit and is calculated using the difference between your fixed rate and the current wholesale rate for the remaining term, applied to the outstanding loan balance.

In a falling rate environment, break costs can reach tens of thousands of dollars. In a rising rate environment, the calculation may produce a credit in your favour, though not all lenders pass that credit back to the borrower. The formula is opaque and varies by lender. Most provide an estimate on request but won't guarantee the figure until the discharge is processed.

Nurses refinancing investment loans or selling a rental property during a fixed term need to model break costs before committing to the transaction. If the property has increased in value and you're releasing equity to fund a second purchase, paying the break cost may still be worthwhile, but the calculation needs to be explicit. We regularly see investors underestimate this figure by half.

Interest-Only Period Fees and Conversion Charges

Some lenders charge a fee to establish an interest-only period on an investment loan, particularly where that period extends beyond five years. The fee is typically $100 to $300 and applies at the time the interest-only period is set or extended. Not all lenders charge this fee, and some waive it for package holders.

When the interest-only period ends, the loan converts to principal and interest repayments. Most lenders process this conversion automatically without additional cost. A small number charge a conversion fee of $50 to $150. Where the loan remains fixed at the time of conversion, repayments increase significantly because the principal is now being amortised over the remaining fixed term rather than the original loan term.

Consider a registered nurse who takes out a five-year fixed rate investment loan with a three-year interest-only period. At the end of year three, repayments switch to principal and interest, but the loan still has two years of fixed rate remaining. The principal is now amortised over 27 years instead of 30, which increases the monthly repayment further. If rental income doesn't cover the new repayment amount, the shortfall comes out of the borrower's salary. That shortfall is still tax-deductible under current negative gearing rules for properties held before May 2026, but the cash flow impact is immediate.

Portability and Variation Fees During the Fixed Term

Portability allows you to transfer a fixed rate loan from one property to another without breaking the contract. Not all lenders offer this option, and those that do typically charge a portability fee of $200 to $500. The loan amount, interest rate, and remaining fixed term carry over to the new property. If the new property requires a larger loan, the additional borrowing is usually provided as a separate facility at the prevailing rate.

Variation fees apply when you request a change to the loan structure during the fixed term, such as switching from principal and interest to interest-only, or vice versa. The fee ranges from $150 to $350. Some lenders allow one free variation per year, others charge on every request. This fee is separate from any break cost and applies even where the loan balance and rate remain unchanged.

When considering a mortgage broker for nurses, ask specifically about portability and variation terms if you expect your circumstances to change during the fixed period. Many lenders restrict or prohibit these changes entirely on fixed rate products, and the policy isn't always disclosed upfront.

Redraw and Extra Repayment Restrictions on Fixed Rate Loans

Fixed rate investment loans limit your ability to make extra repayments without penalty. Most lenders allow between $10,000 and $30,000 in additional repayments per year before charging a fee or triggering a partial break cost. Repayments beyond that threshold are treated as an early partial repayment and attract the same wholesale rate differential calculation as a full break.

Redraw facilities on fixed rate loans are less flexible than on variable products. Where redraw is offered, each withdrawal may incur a fee of $50 to $100, and some lenders cap the number of redraws per year. Others don't offer redraw at all on fixed rate investment loans, meaning any extra repayment is locked in until the fixed term expires.

Nurses purchasing their first investment property often prefer variable rate loans for this reason, particularly where they expect irregular lump sum repayments from shift penalties or overtime. If rate certainty is the priority, a split loan structure with part fixed and part variable preserves some repayment flexibility while locking in a portion of the rate.

Discharge and Settlement Fees on Exit or Refinance

Discharge fees apply when you pay out a fixed rate investment loan in full, whether by selling the property or refinancing to another lender. The fee typically sits between $300 and $500 and covers the lender's administrative cost of releasing the mortgage and providing a discharge authority to the new lender or settlement agent.

This fee is separate from break costs and applies regardless of whether you're exiting during or at the end of the fixed term. Some lenders waive the discharge fee if you refinance to another product with the same institution, but most charge it on any full repayment.

Where you're refinancing an investment loan to access equity or secure a lower rate, the discharge fee from the old lender and the application and settlement fees from the new lender stack together. Combined with any applicable break cost, the total switching cost can exceed $2,000 before considering valuation and legal fees. For nurses holding home loans and investment loans with the same lender, some institutions offer internal refinance pathways that reduce or eliminate certain fees, but this varies by lender and product.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structure on any fixed rate investment loan before you commit, including the scenarios where break costs, variation fees, or LMI apply, so the total cost is transparent from the outset.

Frequently Asked Questions