These days, plenty of Australians know that it pays to compare, especially when it comes to home loans – but how does one actually go about comparing loans? The answer is our home loan comparison calculator, which lets you plug in the relevant details of two different home loans and apply them to the same loan balance. This lets you see which one might be cheaper over their full loan term (in terms of their total repayment amounts including fees and interest).

Why compare home loans?

Comparing home loans is a crucial first step on any prospective buyer’s path to a new home or investment property. Without a preliminary comparison of your different home loan options, you likely won’t have any idea what home loan types could suit you, let alone which specific home loan products could be worth a thorough investigation. How are you meant to decide between a fixed rate home loan or a variable rate home loan if you haven’t compared how they stack up against each other overall?

And while the act of comparing home loans is a crucial step, the process of researching and comparing home loans can give you the time and space necessary to flesh out your own understanding of your financial situation and priorities, and then use that understanding to refine your search.

For example, after looking at a few different home loans, you might decide a smaller loan amount is in order or that an offset account is non-negotiable for you. You won’t know until you compare for yourself!

Which is better: a low interest rate or low fees?

Home loans will sometimes be advertised as ‘low-rate’ or ‘low-fee’, but one isn’t necessarily better than the other. You’d have to compare the home loans in question to see which one works out cheaper in the long run, and even then, that doesn’t necessarily make it better-value than the more expensive home loan.

When comparing home loans based on their interest rates, it’s easy enough to figure out which loans come with friendlier rates attached, and subsequently which home loans you’d pay less total interest on.

It’s also worth noting that a lower interest rate may see your borrowing power increase – which isn’t necessarily a bad thing, but could have negative implications for your loan-to-value ratio (LVR) and potentially having to pay lender’s mortgage insurance (LMI).

And when it comes to comparing home loans based on fees, lower isn’t always better.

This is because a home loan’s fees (along with its comparison rate) will typically be at least somewhat representative of the loan’s feature offerings. A bare-bones home loan with few or no features will likely have a lower annual fee than a home loan that comes full to the brim with features. But that doesn’t necessarily make the cheaper home loan better than the more expensive home loan.

The question of which loan is ‘best’ or ‘right’ for you can only be answered by you,* based on your own understanding of your financial wants and needs.

*Potentially with the help of a financial advisor or mortgage broker

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Is the comparison rate on a home loan important?

Comparison rates will be, by far, some of the most useful pieces of information you’ll be given when exploring your home loan options. A home loan’s comparison rate represents its true cost; in other words, it’s the interest rate plus any ongoing costs of the home loan, including any regular fees and charges.

It’s worth noting that while the comparison rate can tell you a lot about a home loan, you probably won’t learn too much by comparing different comparison rates from different home loans. A home loan’s comparison rate exists to be compared solely against that same home loan’s advertised interest rate, not other home loans’ interest rates.

What else should I look at when comparing home loans?

When comparing home loans, you’ll want to try and keep the following points in mind:

  • Type of home loan. Start simple; do you want a fixed interest rate home loan or a variable interest rate home loan, and will the home loan be for an owner occupied home or an investment property? These are some of the more foundational loan details you’ll want to figure out sooner rather than later.
  • Fees. Does it come with an upfront establishment fee? How expensive are the ongoing fees? You’ll want a clear picture of the annual fees and charges that any given home loan will involve.
  • Repayment frequency and flexibility. Do you want to make weekly, fortnightly or monthly repayments? Does the home loan in question allow for extra repayments? These are important questions you’ll want answers to.
  • Repayment type. Will you want a conventional principal & interest home loan, or would you like to make interest-only home loan repayments for a few years?

You may also want to seek advice from a mortgage broker or financial advisor, as they’ll likely be able to help you zero in on the home loan features and details that are right for you.

Frequently asked questions

Is the cheapest home loan the best option?

Overall cost is far from the only factor that should be considered when figuring out whether a home loan offers you value or not. A home loan could be significantly cheaper overall than its competitors, but it might be forgoing valuable features like an offset account or repayment flexibility.

To put it another way, a good-value home loan should come with both the features you need and a price tag that’s palatable to you. A cheap home loan will only have the latter and may not be right for your financial situation and priorities.

How can I learn more about a home loan product?

Home loans will generally come with a Key Fact Sheet (KFS) summarising the product and estimating its cost to you over the loan term. This is usually a good place to start if you’re looking for more detailed information on a specific home loan product.

Other financial products, including insurance, personal loans and credit cards, generally come with what’s called a Product Disclosure Statement (PDS). These function similarly to a KFS but are generally much more detailed.

What’s an introductory rate?

An introductory rate is a promotional interest rate offered by a lender to try and incentivise new home loan customers. The length of the introductory rate period will vary by lender and by product, but always be sure to check the revert rate (the interest rate that you’ll be charged at once the introductory rate period ends).

It’s worth noting that an attractive introductory rate doesn’t necessarily make for a good-value home loan. You should assess any given home loan product on its full range of pros and cons, not just an attractive sign-up deal.

Compare home loans with us today!

If you’d like to compare more than two home loans at a time (and do a more detailed comparison while you’re at it), try our home loan comparison tool! With it, you can research and compare a range of home loans from multiple different lenders, and even apply for one if you decide it’s right for you.

So, what are you waiting for? We make comparing home loans simples!

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Ready to look for a better deal? It’s easy to compare with us.

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