The fees you should expect to see
Establishment or arrangement fee — a percentage of the facility, charged for structuring and settling the loan, usually deducted at drawdown. Valuation fee — paid to an independent panel valuer, scaling with the complexity of the asset. Legal fees — the lender's documentation and settlement costs, plus your own legal advice. Searches, registration and discharge fees — small but real. Line or management fee — periodic, on some facilities, particularly construction. Extension fee — payable if the term is extended. Exit or discharge fee — charged at repayment on some structures.
Why fees can outweigh the rate
A 2% establishment fee on a facility held for three months is the equivalent of roughly 8% per annum on its own. That is why a lender quoting a lower headline rate with heavier fees can be more expensive than one quoting a higher rate with lighter fees.
The fair comparison is total cost of funds: all interest for the expected term, plus every fee and cost, expressed in dollars. Ask each lender for that single number.
Questions to ask before you sign
What is the total dollar cost if I hold this facility for the full term? What is charged if I repay early — is there minimum interest or a break cost? What happens on default: what is the default rate, and from when does it apply? What does an extension cost? Are valuation and legal fees capped or estimates? Are any fees payable if the loan does not proceed after terms are issued?
Key points
- Expect establishment, valuation, legal, search and sometimes line or exit fees.
- On short terms, fees can exceed the impact of the interest rate.
- Compare total cost of funds in dollars, not headline rates.
- Confirm early repayment, default and extension costs before signing.
Frequently asked questions
Are private lending fees negotiable?
Some are, particularly on larger or lower-risk facilities. Third-party costs like valuation and legal are generally passed through at cost.
Can fees be capitalised into the loan?
Commonly yes — fees are often deducted from the advance or added to the balance, which increases the effective LVR.
Is there a fee to get indicative terms?
We do not charge for reviewing a deal and issuing indicative terms.