Comparing home loans can be confusing with so many variables to take into consideration. That’s why we’ve made the job of comparing home loans easy with this handy home loan comparison calculator. Read on to find out how to use Savvy’s helpful mortgage comparison calculator so you’ll get all the information you’ll need to make an informed mortgage comparison decision.
Savvy makes it easy for you to compare home loan repayments. To compare two similar loans, first enter the loan amount and loan term you’re contemplating at the top of the loan calculator page.
From there, you can enter the details of the first and second home loans you wish to compare. If either loan has an introductory interest rate, enter that rate and its term in months. Finally, you can input the ongoing interest rate (also called the ‘revert rate’ by some lenders) for each loan.
The results of your comparison will appear after you’ve inputted all the required information, with the graph showing you how much you will save in interest and fees by choosing the cheaper loan.
Some of the additional features to look for in a loan which can save you a meaningful amount overall include:
Having an offset account can save you money by reducing the interest you pay on the principal sum you borrowed. Any money you place in your offset account will reduce the interest you’re charged. For example, if you have a $400,000 loan but have $50,000 in an offset account, you will only be charged interest on $350,000, as the remaining $50,000 is offset.
Variable rate loans offer you the flexibility to make additional repayments on your loan, reducing the overall interest you pay. If you receive a financial windfall, consider paying this sum off your loan to reduce the interest you pay.
In contrast, fixed rate home loans frequently have limits on how many additional repayments you’re able to make in a year or a dollar limit on them. This limitation means you may not be able to pay your fixed loan off sooner if you do receive a cash boost.
If you do make additional repayments on your home loan, having the ability to redraw them if you face a sudden emergency can be a financial lifesaver and will avoid the necessity to take out a more expensive car or personal loan if you suddenly need a lump sum.
Variable interest rate loans tend to be more flexible and offer you the option of making additional repayments so you can pay off your loan sooner. Fixed rate loans offer greater security and protection from interest rate rises.
However, it’s possible to enjoy the best of both worlds by splitting your loan into two and having one portion on a fixed rate (for a fixed term) and another on a variable rate. Ask your lender if they offer the flexibility to split your loan, as this option could save you thousands in reduced interest payments if you pay off the variable loan more quickly.
You should enter the loan’s base interest rate into the Savvy calculator. A loan’s comparison rate already takes into account most of the fees associated with that loan. However, this calculator considers upfront and ongoing monthly fees separately and compares home loan repayments for you to make life easy. For that reason, you should enter the loan’s base interest rate plus upfront and monthly fees as separate items, rather than using the home loan comparison rate supplied by the lender.
In Australia, all lenders must display a loan’s comparison rate alongside the base interest rate. The comparison rate is based on a $150,000 loan taken out over a 25-year term, enabling borrowers to compare the true cost of a loan when hidden fees are taken into consideration.
Before you start comparing loans, consider what sort of borrower you are. Are you a first-time homebuyer looking for a low introductory rate or low deposit loan? Perhaps you’re several years into your loan, and are looking to refinance to a lower interest rate? If so, there are great low-interest deals available to refinancers. Similarly, there are construction loans for those wanting to build, and investor loans for property investors.
When comparing home loans, make sure you keep the size and term of the loan consistent so that you’re comparing apples with apples so the differences in fees and interest rates become apparent. Once you’ve compared loans and found the one that offers you the cheapest option, you can alter the repayment term until you find a monthly repayment amount that you can afford and fits in with your financial goals.
It may be worth looking at locking in your interest rate at the lower end of the cycle or prioritising additional payments to place yourself in a position to pay off your loan sooner. It’s always good to keep an eye on the home loan market to understand what the latest trends are and where interest rates are heading. You should reassess your home loan finance at least annually and compare your options with Savvy to ensure you’re getting the best deal available.
Some lenders offer finance ‘bundles’ which can be a great way to save on home loan and transaction account fees. These packages mean you pay one single administration fee per year, and in return get your home loan, credit cards, transaction accounts and possibly even home, contents or car insurance on a fee-free or reduced rate basis. Be aware that having all your financial services tied together in one package means you can’t easily ‘shop around’ and switch products to get the best deals available.