Trying to locate the best home loan can feel impossible when you have no idea what you are comparing. Comparing Australian home loans used to be hard work but thanks to the federal government and the use of technology it's becoming a lot easier to identify the best from the worst.
Key Fact Sheet
In January, 2012 the federal government put valuable information in the hands of homebuyers by rolling out the home loan "Key Facts Sheet" legislation. Canberra's banking reform legislation now makes it compulsory for institutions to provide a home loan facts sheet, on request.
The home loan facts sheets was introduced to make it easier for borrowers to compare apples with apples before they apply for a home loan. They are standardised so lenders are required to provide borrowers with information in the same way, making it easier to compare a range of home loans. It helps first home buyers in particular to compare loans side by side and give them just a little more bargaining power.
Important information is highlighted within home loan facts sheets including the headline and comparison interest rates, fees and charges, the total financial cost over the life of the home loan and information about the impact of rate changes. Home loans facts sheet aren't an offer for credit so the potential borrower will still need to apply for the loan and meet any lending criteria.
Compare home loans online
Along with using the home loan facts sheet, borrowers will typically be better off by comparing a few different loan offers online. Financial comparison websites such as RateCity, give borrowers the chance find the best loan for them and a potential saving off the total of their loan.
By comparing home loans, borrowers could potentially save tens of thousands of dollars of the life of the loan if they compare products and get one that best suits their needs. For instance, moving from a rate of 7.30 percent to a rate of 6.35 percent, a borrower with a $400,000 home loan could potentially save around $240 in monthly repayments and more than $72,000 over 25 years.
Product disclosure and comparison rate
In addition to using home loan facts sheets and comparison websites, borrowers should always refer to the product disclosure statement before taking up any financial product and RateCity recommends using the "comparison rate", which includes ongoing fees and charges factored into the rate.
For further clarity about the cost of taking out a home loan, including repayment and total interest costs, try using a home loans calculator such as the mortgage calculator on RateCity, or visit our home loans guide for more information about borrowing today.