Compare home loans

Choosing a mortgage may be the biggest financial decision you’ll ever make. Compare home loans to find the mortgage that saves you money and suits your needs.

Compare home loans

To find the best value home loan, you need to do your research and we’re here to help! Here’s how to compare home loans in 4 steps and find the best mortgage for your financial and lifestyle needs.

How to compare home loans?

Choose at least 4 different mortgage offers and compare interest rates, repayment amount, loan features and fees. Use our handy home loan comparison tool to simplify this process.

Step 1: Compare interest rates

Securing a competitive interest rate can save you thousands over the lifetime of the loan.

When you compare home loans you’ll be presented with different interest rate options to choose from.

Fixed rate: The interest rate and repayment amount stay the same for the loan duration.

Variable rate: The interest rate fluctuates depending on the market. This means your repayment can increase or decrease.

Partially fixed rate: Also known as a split loan, part of your loan has a fixed rate and the remainder has a variable rate. You can choose the percentage split of the loan. For example, 30% fixed interest and the remaining 70% variable interest.

When lenders advertise mortgage offers they provide a comparison rate and an interest rate for the loan.

The interest rate only reflects the interest you’ll pay on the balance of the loan, not additional fees associated with the loan.

The comparison rate includes the interest plus most fees associated with the mortgage. Basically, it tells you the true cost of the loan. Use this rate to compare home loans.

Step 2: Compare mortgage repayments and loan terms

Use our mortgage repayment calculator to work out the size of your repayments. A longer loan term means smaller repayments but you’ll pay more interest overall.

Let’s look at how repayments and interest compare on a $400,000 mortgage with a 3% fixed interest rate over different terms.

Can you comfortably afford the projected repayment? Consider your income, expenses, and other debt repayments to see if it works for your budget.

Step 3: Consider loan features

Some loans, usually variable rate loans, have extra features such as;

Redraw facility: You can take out any extra repayments you’ve made over the required minimum repayments.

Extra repayments: Make additional repayments on your loan without penalty.

Salary crediting: Your employer can credit your salary directly into your loan account. This can offer tax benefits.  

Offset account: This is a transaction account linked to your mortgage. An offset account can help reduce the interest payable on your loan.

Discounted or waived fees: Standard fees usually associated with a mortgage discounted or waived. For example, loan establishment fee.

If flexibility is important to you, redraw, extra repayments, and an offset account may be features to consider.

Step 4: Fees

What fees are associated with the home loan? Fees will vary between lenders but the most common include;

Application fee: The cost of establishing the loan.

Early exit fee: Charged if you pay your loan back before the term.

Discharge fee: Payable when you’ve repaid the loan in full.

Ongoing fees: Administration fees charged monthly or annually.

Break fees: Applicable if you decide to refinance.

Redraw fees: May apply to redraw features.

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance (LMI) covers the lender if the borrower defaults on a repayment.

If you are borrowing more than 80% of the value of the property, most lenders will require you to pay LMI.

If you have less than a 20% deposit, keep this when you compare home loans and contact each lender to ask about LMI.

LMI is a once-off payment added to your mortgage. The cost will depend on the amount you borrow and Loan-to-Value Ratio (LVR).

You want the most competitive rate available. The below example highlights how just 1% can make a big difference in repayments and interest.

How can I get a good home loan interest rate?

Lenders generally extend the most competitive home loan interest rates to borrowers who fit the following criteria;

  • Have an excellent credit score.
  • Can prove a solid track record of savings.
  • Have a low debt to income ratio.
  • Are employed with a steady income.
  • Have saved a 20% deposit.
  • Can comfortably meet projected repayments. Lenders take into account current income and expenses.

Common home loan questions answered

Have any other questions regarding how to compare home loans? Here are answers to the most common queries.

Can LMI be waived?

If you qualify for the First Home Owners Deposit scheme LMI is waived. Some lenders also waive LMI for certain types of professionals. For example, doctors, lawyers, and accountants.

Is a fixed rate better than a variable rate?

If you prefer certainty in your budget, a fixed rate is a good option as repayments don’t change. A variable rate is usually more flexible and includes extra features.

When do variable mortgage rates change?

A variable rate will change depending at what rate the RBA sets the official cash rate and what the market is doing.

Can I change my mortgage?

Yes. It is possible to switch home loans, also known as refinancing, at a later stage. Costs are involved in switching.

How does an interest-only loan work?

For a set “interest-fee” period you only repay the interest on the amount you have borrowed. You don’t repay the loan during that time.

What does a ‘principal plus interest’ mortgage mean?

The amount you borrow is known as the principal. Interest is charged on the principal amount. Your repayment is split between paying the interest and the principal – slowly reducing what you owe.