Home Loan Comparison in Australia
Contents
What is a home loan or mortgage?
A home loan, also called a mortgage, is a sum of money borrowed to pay for a property. Most buyers pay a deposit between 5% to 20% of the property value, then borrow the remainder and pay it off in instalments over 25 or 30 years. Over the life of the loan, you’ll pay back the principal (amount initially borrowed) as well as loan interest charged by the lender.
Comparing home loans is no easy feat. There are all kinds of options available for your mortgage, but not all of them will be right for you. The goal is to find the best mortgage at the cheapest rate, and this article dives into all the factors that can affect the loan process. Read our summary to learn how to properly compare home loans in Australia so that you can afford your dream property purchase.
Variable rate home loan comparison tool
Discover the variety of variable rate home loan options available in Australia with our straightforward comparison tool. Designed for everyday people with a basic understanding of home loans, our interactive table lets you quickly sort by the actual comparison rate, which includes all hidden fees for a true cost assessment. You can also filter by various home loan features and expand each entry for more detailed information. The products shown and estimated repayments are based on a $600,000 loan over a 30-year loan repayment period. With this tool, we aim to make the path to homeownership a little clearer and a lot more manageable.
- Extra Repayments
- Offset
- Partial Offset
- Repayment Holiday
- Redraw
- Splitting
Lender | Interest Rate | Comparison Rate | Monthly Payment | Extra Repayments | Offset | Partial Offset | Repay Holiday | Redraw | Splitting | Max LVR with LMI | Upfront Fees | Ongoing Fees | Exit Fees |
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Information presented in this table is specific to Variable Rate Home Loan Products. While care has been taken to ensure accuracy, fees and features may differ if you choose Fixed Rate Products. The table includes ongoing repayment amounts, which are typically paid monthly and comprise both the principal and interest. It also details any potential upfront fees, such as application or establishment fees, and ongoing fees that the lender may charge throughout the life of the loan. Furthermore, should you decide to pay off or refinance your loan before the end of its term, exit fees may apply. All features, such as offset accounts, redraw facilities, and flexible repayment schedules, are associated with the respective loan product and may vary.
*Comparison rate is a combination of both the interest rate and any mandatory fees associated with the loan into one rate for easy understanding and comparison of the loan’s true cost.
Types of home loans
The first step to being an informed shopper is learning the most popular mortgage options. This will help you compare home loans and understand the main features of each one.
Basic loans
These are simple loans with minimal features and lower interest rates. They usually come with fees. Basic loans are best if you have a straightforward financial situation and don’t need custom options.
Standard loans
With these loans, you can do things like redrawing money that you’ve already paid in extra repayments, or splitting your interest rate into part-fixed and part-variable. You can also have an offset account to reduce your interest costs.
Low deposit home loans
These home loans enable buyers to buy a house without paying a major deposit of 20% or more. They make homes more accessible, but usually require Lenders Mortgage Insurance and higher interest rates to protect the lender.
Construction loans
These unique loans grant you funds to build your future house. The benefit here is that you only draw down as much of the loan as you need during the construction process, and you only pay interest on the amount drawn down.
Package home loans
These loans usually come with a free transaction account and a credit card with no annual fees. Be aware that some have package fees of up to $400 per year, so make sure that it makes sense for your needs.
Alternatives to home loans
A traditional mortgage might not be the perfect fit for everyone, so it’s worth taking a look at other opportunities.
Rent-to-own scheme
This arrangement allows you to rent a home for a defined period and then have the option to purchase that home at a pre-set price once the rental period ends. Rent-to-own is still fairly new and is limited in some states.
Buying a home as an owner-occupier or as an investor
When comparing home loans in Australia, your options will be different based on whether you plan to live in the property yourself or buy it as an investment.
Owner-occupier home loans:
These loans are intended for those who want to buy or build a house as their own residence. As you compare home loan interest rates, you’ll see that these loans tend to be cheaper than investor loans.
Investor home loans:
These are geared towards buyers who purchase a home as an investment. Investors may want to rent out the property and/or re-sell it at a profit.
Both of these loan types can have fixed, variable, or split interest rates. They can also offer either a principal & interest repayment or an interest-only repayment setup.
What to look at when comparing home loans
There are several key aspects of a mortgage to consider before selecting one. While it’s obviously critical to compare home loan rates, you also have to think about repayment types, loan features, and any additional fees. By looking at these factors, you’ll give yourself the best chance possible of getting the best home loan deal overall.
Interest rates
The main takeaway here is that the lower your home loan rate, the lower your repayments. T These are the three main kinds of interest rates:
Fixed rate: This rate will lock in for a period of one to five years. After the fixed term, the rate goes to a standard variable rate, or you can re-fix the rate. These rates have fewer features but have the benefit of extra stability.
Variable rate: This rate will fluctuate based on the housing market and is often tied to the Reserve Bank cash rate. These loans are less predictable and can be pricier, but they usually have extra features like offset accounts and redraw facilities.
Split rate: This is a “best of both worlds” setup where part of the rate is fixed and the other part is variable. This way you get some of the stability of a fixed rate, while still taking advantage of some opportune savings with a low variable rate.
As well as the loan’s interest rate, you can consider the comparison rate, which accounts for interest plus most extra fees and charges on the loan. Just be mindful that the comparison rate is calculated based on a 25-year term and a loan amount of $150,000 on all home loans, meaning it may not be relevant in all situations.
Repayment types
Given the length of time you’ll be repaying a home loan for, you definitely want to check out the options for how exactly your repayments will be structured. The goal is to find the option that matches your budget needs.
Principal & interest repayments: With this option, your payments go towards the principal loan amount as well as the interest accumulated.
Interest-only repayments: Here, your payments only go towards the interest for a defined period. This is common with construction and bridging loans, and is a popular option for investors.
Home loan features
Some mortgages offer added flexibility through the features available. When comparing home loans, picking suitable home loan features can be a major way to save money.
Offset account: This is a transaction account connected to your home loan. Whatever sum is in your offset account gets subtracted from the loan balance when interest is calculated. Interest only builds on the remaining balance instead of the entire loan total.
Extra repayments: If you have some extra money on hand, you could put it towards the loan balance to help you pay off the loan faster. Doing this means paying off your loan sooner with less interest. Most variable rate loans allow this.
Redraw facility: If your loan allows extra repayments, it may also allow you to re-borrow those funds and get them back for your immediate use. There might be a redraw fee or a limit on the total you can borrow back.
Special promotions: Certain lenders will have unique offers for particular customer groups. For instance, medical professionals can sometimes get discounted rates since they are seen as stable earners.
Home loan fees
When looking at the cost of a loan, some customers compare home loan rates and stop there. However, it’s important to pay attention to the fees as well.
Application fees: These are charged when you initially apply for the loan.
Ongoing fees: These come on a regular basis for keeping the loan open.
Valuation fees: These cover the lender’s cost for having the property valued.
Discharge fees: These apply when the loan is paid off or refinanced.
How much should I save for a home loan deposit?
There is no magic number for the dollar amount of a home deposit, but it’s important to look ahead and consider your Loan-to-Value Ratio (LVR). The LVR represents the percentage of the home price that you are borrowing. Traditionally the aim is to save at least a 20% deposit, meaning you would borrow 80% of the value for an LVR of 80%.
If a 20% deposit is too steep, many lenders will grant loans with as little as 5% paid upfront, but they will likely require you to pay for Lenders Mortgage Insurance (LMI). This could cost up to an additional 3% of the loan amount, and is either a one-time upfront cost or gets added to the loan amount and repaid gradually through the regular repayments.
Learn more about home loans
There’s a lot more to home loans than you might expect, even if you’ve already bought a home. Our aim is to equip you with a variety of useful home financing resources, including guides, tools and explainers on specialist loan types. Whatever your financial situation, MNY can help you get connected with the best home loans.
Home Loans for Bad Credit
A bad credit history can make it seem impossible to get a quality home loan, but this isn’t the case. This article helps you access affordable home financing even if you have a lower credit score. We also provide tips on how to build back your credit and get on the road to a more secure financial future.
Fixed Rate Home Loans
Many buyers are drawn to the stability of a fixed-rate home loan. Your interest rate can be hugely impactful for your overall costs and this article dives into the benefits and drawbacks of having a home loan with a fixed interest rate.
First Home Buyers
If it’s your first time buying a home, you may be eligible for special loan offers as well as government subsidies. There are several missed opportunities that many current homeowners wish they had known before buying their first home. We cover all of that and more in this article.
Home Loans for Doctors
Many medical professionals don’t realise that they may enjoy preferential status with certain home loan providers, and can get discounted interest rates. The goal of this article is to outline the pros and cons of home loans for doctors and how to make sure you’re truly getting the best value.
Hidden Costs of Buying a Home
Buying a home is often more complicated than people realise, and some customers may be unprepared for the laundry list of additional expenses. Government requirements, legal obligations, and financing fees can all stack up. This article gives a window into these hidden costs.
Home Loan Repayment Calculator
With all the different dollar amounts and percentages that go into a home loan, it’s hard to make sense of exactly what you’ll be paying. Our repayment calculator helps you understand exactly how much money you’d owe for each payment, as well as how much you’ll pay over the life of the loan.
Mortgage Brokers
When buying a house, it always helps to have an expert in your corner. Many people benefit from a mortgage broker’s guidance regarding loan applications and the home purchase process. This article discusses the different services they offer and how to find a reputable mortgage broker.
Variable Rate Home Loans
Everybody wants to save some money on their home loan. A variable rate loan typically lets you take full advantage of reduced interest rates, and this loan type also tends to come with special features that offer enhanced flexibility for your repayments. This article outlines the key points of variable rate home loans.
Home Loan Refinancing in Australia
Refinancing your home loan can save you thousands of dollars on interest, open up new loan features that enhance flexibility, and provide access to much-needed funds for renovations. This article covers everything you need to know about mortgage refinancing.
Australian Housing Market Report
Discover the nuances of the Australian housing market with our detailed report. Learn about current trends, future forecasts, key factors affecting the market, and predictions from major banks. This comprehensive analysis empowers you to make informed housing decisions.
Lenders Mortgage Insurance for Australians
You’ve likely heard the term LMI used in the context of home loans, but you may not fully know what it means or how it’s relevant. Learn about the benefits and drawbacks of Lenders Mortgage Insurance, the scenarios in which it’s required, and what you can do to minimise this common major expense.
Home Equity Loans in Australia
If you’ve been making consistent progress towards paying off your mortgage, you may have the opportunity to take out a low-interest loan that is backed by your current home equity. Find out whether a home equity loan is the right fit for your financial goals and what you can use this loan type for.
Bridging Loans for Australian Homeowners
Trying to buy a house while simultaneously selling your old one isn’t easy. Many homeowners are stressed about the in-between period when they’ll either have nowhere to live, or be stuck paying two mortgages. Get the facts on how a bridging loan can help solve this dilemma and ease the transition.
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Impact of Interest Rates on Australian Mortgages
Facing rising mortgage costs? Our study examines interest rates and fees across 23 Australian lenders, revealing crucial differences. From upfront costs to repayment features, discover how to navigate the market and make the best financial choices for your home loan.
Bringing it all together: how to do a home loan comparison
Given the importance of a home purchase, it’s essential that you enter the real estate arena armed with up-to-date knowledge on home loans. Once you have a handle on the loan type that suits your needs, you can dig into the interest rates, fees, and special features that will help sweeten the deal. By the end of the process, you will know that you settled for nothing less than the best.