James HurwoodWritten by James Hurwood
Reviewed by Stephen Zeller
Last updated 05/01/2024

Key takeaways

Stephen Zeller, General Manager

Expert tips for comparing home loans

As our General Manager of Money, Stephen Zeller believes that comparing your options is a must for anyone thinking of taking out a home loan. But to give you a hand with your comparison, he’s got some tips for you:

Know what you’re looking for

Before you start comparing the different home loan options available, think of what’s important to you in a home loan. Features such as a mortgage offset account or a redraw facility may be important to you, or you may want 24-hour support available for peace of mind. Having a list will help you make an informed decision on the right type of loan for you.

Look beyond the advertised rate

Don’t just look at the headline interest rate – it’s crucially important that you understand and compare a home loan’s comparison rate as well. This will give you a better idea of the true cost of any given home loan you’re looking at.

Work smarter, not harder by comparing with us

Comparing home loan products in the one place on our website can save you the time and hassle of going to a number of different lenders individually!

What to know before you compare home loans

woman doing home loan research

Why compare home loans?

Comparing home loans is a crucial first step on any prospective buyer’s path to a new home, investment property or even simply a new home loan (if you’re refinancing). Without a preliminary comparison of your different home loan options, you likely won’t know which 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?

Comparing home loans is a crucial step in any borrower’s home loan journey, and 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.

For example, after looking at a few different home loans, you might decide a smaller loan amount may be more suited to your circumstances, or that an offset account is non-negotiable for you. You can compare for yourself, which you can do by using our home loan comparison calculator!

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; it’s calculated using the interest rate plus any additional costs of the home loan, including any regular fees and charges.

Be sure to weigh up different comparison rates when you’re comparing home loans! A comparison rate can tell you a lot about a specific home loan, but comparing different comparison rates from different financial institutions will help you evaluate them using the same basic criteria.

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 cheaper overall than its competitors in terms of the overall repayment amount, but it might be forgoing valuable features like an offset account or repayment flexibility that you may find useful.

To put it another way, a home loan that suits you should come with both the features you are looking for and at an interest rate that’s palatable to you. A home loan that doesn’t offer both may not be a good fit for your financial situation and priorities.

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 once the introductory rate period ends).

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


What to keep in mind when comparing home loans

home loan feature comparison matrix

What should I look at when comparing home loans?

When comparing home loans, you may 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. If you’re looking to refinance, you may already know which loan type is appropriate.
  • Fees. Does it come with an upfront establishment or application 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 discuss your needs and goals with 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, and ultimately help you make a more informed financial decision.

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 as a better option for you 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 home loan rate may see your borrowing power increase. This isn’t necessarily a bad thing, but borrowing significantly more could push your loan-to-value ratio (LVR) higher, and potentially result in you 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 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 lower annual and upfront 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 (potentially with the help of a financial advisor or mortgage broker) based on your own understanding of your financial goals, wants and needs.

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.

Stephen Zeller, General Manager

Meet our home loans expert, Stephen Zeller

Stephen has more than 30 years of experience in the financial services industry and holds a Certificate IV in Finance and Mortgage Broking. He’s also a member of both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the Mortgage and Finance Association of Australia (MFAA).

Stephen leads our team of Home Loan Specialists, and reviews and contributes to Compare the Market’s banking-relating content to ensure it’s as helpful and empowering as possible for our readers.

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