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How to compare home loans with Get a Better Rate

Whether making your first home purchase or looking to start the refinancing process, finding a home loan that suits you can be a long journey. Comparing home loans in your own time requires research, calculation and time, which could be better spent elsewhere.

Leave the hard work to Get a Better Rate with our home loan comparison resource. Just punch in your desired loan details, rate type, and what type of loan you are looking for, and we will do the rest. With over 40 lenders included in our comparison, we will provide options within your intended loan-to-value ratio (LVR) and interest rates.

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Why compare home loans?

A home loan is a long-term contract, meaning you want one that works well alongside your personal and financial situation, no matter what life throws at you. Finding that perfect fit requires plenty of research, but it also means comparing home loans to see how your choices match up against each other.

The main reasons why people compare home loans include:

Saving money with better interest rates

A high-interest rate can cost you tens of thousands throughout a home loan term, so finding a low rate is an integral financial decision. 

Not only should interest rates be compared between financial institutions, but comparing the benefits of a fixed or variable rate home loan should also be done to see what fits your lifestyle best.

Wanting the convenience of lower loan repayments

If you prefer having more cash on hand in your monthly budget, or want to slow down the current payment scheme of your home loan, lower home loan repayments are needed. 

Comparing home loans can help you find a loan that does not just save you money with better interest rates, but also lower monthly repayments that work with your budget goals.

Deliberating between a variable or fixed interest rate

Home loans require a choice between types of interest rates. 

Comparing home loans allows a chance to deliberate between the stability of fixed interest rate payments or a more flexible variable rate. The former can guarantee a low-interest rate if they time their home loan request correctly, while the latter can enjoy changes to the interest rate market as it comes.

Needing to cater to unique circumstances

Some individuals require a specialised loan, such as a low deposit loan with Lenders Mortgage Insurance (LMI) or a rural home loan for a first house. Select lenders are likely to offer these features, so it is best to compare options to see if your unique circumstances are covered.

By comparing the key factors of a home loan, it is ultimately easier to find which options will save you more money. Moreover, it can help you deliberate between offered features to find which one will support your future and your life's intended trajectory.

Key components of a home loan

For those attempting to obtain their first home loan or have been out of the mortgage game for a while, you need to remember a lot of financial components. 

These key components are usually what should be analysed during a home loan comparison, which is why understanding their place in a home loan is so vital:

  • Principal: The principal of a home loan is the total amount of money you have borrowed from your chosen lender.

  • Interest: The interest is the cost charged by your lender for borrowing the principal.

  • Loan Term: The length of time it is predicted to take your home loan to be paid off is referred to as loan terms.

  • Repayment Frequency: The frequency of payments set out to pay off your home loan throughout the term. The frequency can be set as weekly, fortnightly, or monthly repayments.

Understanding home loan types

The type of home loan that is best for you depends on your circumstances and how you intend to manage your money in the future. That is why the type of home loan should always be considered when beginning the comparison process.

Fixed-rate home loans

The interest rate on this type of home loan is fixed for a set period, generally coming to 1-5 years. For an investment property, however, this period will be longer. Once this period has ended, you can choose to continue with a fixed-rate loan or change to a new home loan type.

The main advantage of this type of home loan is its stability in knowing how much your loan repayments will be and that they will remain the same during the fixed-rate period. This is useful for budgeting, but it also means you cannot take advantage of dropping interest rates to get lower repayments.

Variable-rate home loans

This home loan type is named because it follows variable interest rates to determine how much your repayments will be. For example, if interest rates drop, so will your repayments, and vice versa. You can also make extra repayments with this type of home loan to pay off your loan balance sooner or utilise an offset account to reduce the interest you pay.

Split home loans

A split loan allows you to mix the stability of a fixed interest rate with the features of an offset account from a variable rate. This combination of loan types allows you to split your total loan amount into two smaller loans. One amount will be held at a fixed rate period, while the other will be a variable, allowing you to remain financially secure no matter how interest rates rise and fall.

What is a good interest rate for a home loan in Australia?

Much like any other country, Australia is liable to experience sudden changes in the home loan market, especially regarding interest rates. This means a 'good' interest rate is hard to quantify as an absolute, but observing the current market and its trends can help you decide what will be right for you and your future.

Australia's 2023 home loan market has experienced a sudden and rapid climb in interest rates over the past year or so. Previously, interest rates remained somewhat stable, remaining below 4% from July 2019 until July 2022, according to the Reserve Bank of Australia (RBA) for owner-occupied variable rates. As of May 2023, however, these outstanding loans sat at 6.03% and showed no intention of slowing down.

Due to these recent changes, what qualifies as a 'good' interest rate currently is very different from how it has been in the past. If you manage to obtain an interest rate currently sitting between 4-5%, you are likely ahead of the current market. 

Will interest rates go down in 2023 Australia?

It is unlikely that interest rates will go down in 2023 Australia. Rather, the RBA's graphs on owner-occupied housing interest rates indicate that both fixed and variable rates will continue to increase in percentage throughout 2023 and beyond.

With this prediction of climbing interest rates, RBA has advised Australians it may be best for many to choose a variable rate over a fixed one to save money in the long term. Locking into current interest rates would mean a period of paying some of the highest interest rates Australia has seen in recent years, and would not allow borrowers to take advantage of a potential drop if it came. 

Those rolling off the end of their fixed-rate loans this year will be facing larger increases in their loan repayments, but RBA believes there is hope for recovery by investing in variable interest rates.

Factors to consider when comparing home loans

When looking to compare home loans, there are certain factors that you absolutely must consider to find the best loan for you. These factors can determine the effectiveness and stability of your chosen home loan, as well as how much money you can save throughout your loan term.

Interest rates

One of the first factors that should be compared between home loans is the interest rate, which impacts how much your mortgage repayments will amount to. Essentially, the higher the interest rate, the more you will pay on top of the amount you borrowed from your lender.

The lender will always advertise a home loan's set interest rate before you apply, making it easy to compare this factor with other lenders' proposed loans. While lenders set the interest rate, these rates are also influenced by the overall interest rate set by the Reserve Bank, so be sure to consider the overall changing Australian market when beginning your search for a home loan.

Another aspect of interest rates to consider is whether or not they are variable or fixed interest rates. How much interest you pay during repayments can be greatly influenced by the type of loan you choose. 

Both types have advantages and disadvantages, but the right choice should work with your budget and make the best of the Australian market. This will require you to compare the pros and cons of both types to the current interest rate market, as well as its projected changes.

Home loan repayments

Some lenders are flexible in negotiating the frequency and amount paid during a repayment, but others may only offer a single option. Either way, knowing the frequency that best suits you can help you narrow down which home loan is best for you as you compare home loans.

If you have the available finances and want to pay off your home loan as soon as possible, a weekly or fortnightly repayment schedule may work best for you. More frequent payments mean a shorter overall loan term and an earlier chance to enjoy your property without mortgage repayments hanging over your head. Ultimately, paying off your principal interest means a better chance of saving money and having more time to enjoy the money you have earned.

However, others opt for monthly repayments because it is easier to budget. After all, you pay in a lump sum, allowing you to easily track your mortgage repayments and ensure they are paid on time. This is helped by the fact that most bills require monthly payments, allowing you to set a certain time and monthly budget to ensure everything is set up perfectly for bill payment day.

Comparison rate

A comparison rate allows borrowers to identify the true cost of a loan, allowing for ease of comparison. This is because the rate includes the interest rate and specific charges attached to the loan. 

All Australian lenders use the same formula regulated by the National Credit Code , which means you can use this rate to compare all financial institutions and mortgage brokers.

While comparing the interest rates of home loans can help you narrow down affordable choices, this rate does not acknowledge the additional fees and charges that come with a mortgage. This may mean that a home loan with a low-interest rate has excessive costs for the application or legal fees. That is why a comparison rate can provide you with a more accurate assessment of the costs associated with home loans.

Fees and charges

Home loan interest rates or the overall purchase price of a property are not the only costs you need to consider when comparing home loans. Generally, most home loans come with accompanying fees that cover the costs of the lender's services and any processing services they use. Some fees are paid upfront, while others are ongoing or only occur when exiting a home loan.

While some lenders will waive select fees as a feature, common home loan fees and charges you will encounter include:

Upfront Fees

  • Application fees: Also known as a set-up fee, this charge occurs at the beginning of your home loan application to cover the processing and documentation of the loan. It is one of the more commonly waived fees.

  • Conveyancing fees: Conveyancing refers to the transferring process for ownership of land from a seller to the new owner. The fee covers the services of the conveyancer or solicitor that performs this action.

  • Property valuation fees: Your lender will value your property before offering a loan to safeguard the amount borrowed and ensure that your deposit is sufficient for the purchase price. It is a one-off fee that can be affected by the property type, value, and location.

  • Legal fees: This refers to the fees that are charged when using the services of a solicitor or conveyancer. Buying a home with a mortgage is incredibly difficult without their services in arranging legal documents such as contracts and settlement agreements.

  • Mortgage registration fees: Your state or territory governments charge this fee to register your property as the security on a home loan. This allows future buyers to check if there are any existing claims on the house. It is paid when the loan is discharged or established.

  • Government charges: The government will also charge you to cover your loan's stamp duty, which is the tax that covers the cost of changing title and ownership details. The total fee may depend on the property's cost, your State/Territory, or if you are a first-home buyer. It is typically paid on the settlement of the loan.

  • Lender's Mortgage Insurance (LMI): LMI is an insurance policy for lenders to cover losses that may occur when a borrower can no longer pay loan repayments, otherwise known as defaulting. You will generally only have to pay LMI if your property's deposit is less than 20% (80% loan-to-value ratio), but there are exemptions across lenders and their loans. It is best to avoid this fee as it is incredibly costly.

  • Search processing fees: If you require a title search or adjacent loan application searches from your lender, you will be charged this fee.

Ongoing Fees

  • Annual fees: Most mortgages include annual fees if it is part of a package deal, which may be a credit card or a transaction account. This is to offset the benefits of the deal, which are usually promotional discounts or reduced interest rates. Some lenders may waive these fees in the first year to attract borrowers.

  • Service fees: Often charged monthly, this fee covers the cost and administration of your home loan.

  • Late payment fees: A fee that is only applicable to those who do not pay their minimum monthly repayment amount by the due date.

  • Redraw fees: If your loan comes with a redraw feature, where you can withdraw any extra repayments you have made throughout the loan term, you may have to pay a small fee per redraw.

  • Portability fees: If you use a portability feature, which allows you to keep the same home loan but change the property, you will be charged.

  • Switching fees: When switching your mortgage, or changing from a fixed to variable interest rate, then you may be charged. Additional fees may be included during this refinancing process.

Exit Fees

  • Discharge fees: After you have paid your loan off, your lender may charge you a discharge fee to cover the cost of the process's completion and related paperwork. This fee may also be called a termination or settlement fee.

  • Early exit fees: If you finish paying off your loan early, a fee may be charged by your lender to cover a credit provider's loss with this early finish. It is not specified by the lender when you enter a loan how much this fee will be, so it is best to avoid it.

  • Fixed-rate break costs: A mixture of a discharge and early exit fee, but only for a fixed-rate contract. It is charged when switching to a new loan, when the extra repayment limit is exceeded, or when you repay the loan in full.

Loan features

It is not unusual for some home loans to advertise a specialised feature to appeal more to borrowers. It is important to not forget this factor when comparing loans as they may provide the benefits you have been looking for.

  • Offset accounts: Your lender may offer a transaction account to be linked to your home loan, otherwise known as an offset account. By placing savings into this account, the money can be used to offset the amount you owe on the loan. That way, you will only be charged interest on the difference, saving you significant funds.

  • Redraw facilities: A facility that can be attached to your home loan to allow you to access extra repayments you have made. Maintaining an available balance in this facility can help you reduce interest on your home loan.

  • Extra repayments: While loans come with a set schedule to pay off the principal, some lenders allow extra repayments to be made to expedite this process. These additional funds are usually paid on top of your minimum monthly repayments.

  • Repayment holidays: A temporary suspension of loan repayments in times of financial stress, with the contracted period negotiated with your lender.

Lender reputation and service

Since a home loan is a multiple decades-long contract with a lender, you must choose one you can trust. Applying for a mortgage often means placing your financial well-being in the hands of another, especially as your lender will be taking upon the responsibility of managing your property and the process of obtaining it.

Choosing poorly when it comes to a mortgage lender may mean losing clarity on your repayments if they go bankrupt or being over-indebted due to poor calculations. Fortunately, you can find trustworthy lenders by comparing their reputations and customer service qualities.

Firstly, you can search whether or not a loan business is legit by checking for an Australian Financial Services (AFS) licence at ASIC Connect. By checking the validity of their loan offer and whether there is an existing application process, you can weed out when those 'too-good-to-be-true' loans are scams.

Next, you can research what previous customers say about the lender's services and their overall reputation in the loan industry. By reading legitimate first-hand experiences of a lender's services, you can better understand what their customer service is like and how they handle any customer problems.

You may also want to get recommendations from people you can trust. Friends, family, or coworkers can advise you on their lender of choice and the benefits of their agreement. Ultimately, however, your thoughts and feelings should determine your final choice. Do not be afraid to reach out to gauge whether a lender's reputation is earned first-hand.

How Get a Better Rate can help you

Let someone take the trouble of comparing home loans off your hands by acquiring the services of a mortgage broker. This business works as a go-between for banks and lenders to arrange your home loan, finding the best options for you and your situation. The lack of affiliation with a bank or lender means that your interests come first, saving you time better spent elsewhere.

Get a Better Rate is an independent mortgage broker that only hires trustworthy individuals who are experienced in combing the home loan market to find the best rates and terms for our clients. By understanding your needs and goals, we can determine what you can afford to borrow and what loans fit into these criteria.

Here at Get a Better Rate, we also provide advice throughout the home-buying or refinancing process, meaning you will never be alone once on your journey. Everyone should feel supported when starting a new chapter of life, like opening a home loan, which is why we are here for you at no cost. This includes the management of the final application and settlement, leaving you to celebrate your new home loan simply.

Book a free consultation with founder and mortgage broker: Peter Hammond

Contact Get a Better Rate's founder and prominent mortgage broker, Peter Hammond, for personalised advice throughout your home loan journey. He offers a free consultation to all potential clients, drawing on his 15+ years of experience in retail mortgages for large banks to guide you every step of the way.

Book your consultation with a call at 0420 991 404, or leave a contact form with your details and home loan needs. You can always expect a prompt response to requests and advice that answers all your pressing questions.

Common home loan FAQs

What is a home loan?

A home loan is the total amount of money given by a lender that is used to purchase your chosen property. As it is a loan, you will pay back this amount over a set loan term.

What is Lenders Mortgage Insurance?

A Lender's Mortgage Insurance is a policy a lender takes out to protect themselves against the risk of not recovering the overall loan principal if the borrower is unable to pay their repayments on time. It may also be used if the property is sold for less than the outstanding loan balance.

How do I apply for a home loan?

To apply for a home loan, you must offer at least two forms of identification that the lender accepts. You will also need to provide your income history to prove that you can repay a loan. Further necessary steps will be provided by your lender or mortgage broker when you show interest in applying for a loan.

How do I know which home loan is right for me?

When choosing which home loan is right, you must consider your financial well-being first. Assess your credit history and score, income, employment, existing debt, and financial goals to see what loan matches your situation.

What's the difference between fixed-rate and variable-rate home loans?

A fixed-rate home loan means that your interest rate is set from the beginning of your loan and will not change until your rate period ends. In contrast, a variable interest rate can change at any time as the current market trend of interest rates calculates it.

What's the difference between principal-and-interest and interest-only repayments?

For principal-and-interest repayments, you will be paying down on your principal balance and the interest it accrues from the first payment. Interest-only repayments, on the other hand, do not reduce the principal balance as you are only paying towards the interest. This means the latter loan involves paying more interest throughout the loan term, but your repayments are not as high as the principal balance is not included.

Are small lenders safe? 

Just like any big banks or lenders, small lenders are subject to the same government regulations and close oversight. This means the risk of utilising a small lender is similar to any other big business, so long as you properly research your choice and associate with one that has a good reputation.