Comparing home loans can help you find a suitable loan for your property purchase. To start, learn about different home loan types to find options that best suit your requirements.
1. Research and compare home loan rates and fees
Compare home loan interest rates from various lenders to identify competitive offers. Take note of any fees and closing costs associated with each loan offer.
2. Calculate your monthly repayments
Use online calculators to compare monthly repayments for each loan. Ensure that the repayments align with your budget and financial capabilities.
3. Consider additional home loan factors
When comparing home loans, don’t limit your search to the best home loan rates offered by lenders. It’s important to look beyond interest rates and also consider major home loan features that could help you manage your loan better. However, remember to assess the costs associated with these features to make an informed decision.
4. Choose a loan that suits your specific needs and goals
Once you’ve compared interest rates and features, select a loan that aligns with your long-term financial goals and lifestyle. Remember, the best home loan may not always be the cheapest; there are other important factors to consider besides the interest rate.
Why is home loan comparison important?
Your home loan is one of the largest and most significant financial commitments of your life. Just as you wouldn't buy the first car you saw at a dealership, you should never apply for the first home loan you see.
It’s important to choose the home loan that best suits your lifestyle, financial needs and personal goals. Finding the best home loan involves more than just hunting for the lowest interest rates. Comparing loans and looking at the rates, fees, features and benefits of home loans from a variety of different banks and other mortgage lenders can help you work out which mortgage offers are the best for you, and not just the cheapest.
Even after successfully taking out a home loan, it’s often a good idea to conduct home loan comparisons at regular intervals, to make sure that your mortgage still suits your needs. If you find another home loan with a lower interest rate or features and benefits that better suit your changing circumstances, you may have the option to refinance.
As you get started on your home loan comparison, consider asking yourself the following questions:
1. Are you an owner-occupier or an investor?
The home loan you choose will be influenced by the type of borrower you are. As mentioned earlier, the two main types of borrowers in Australia are owner-occupiers and investors.
Owner-occupied home loans often have lower interest rates than investment loans, as lenders consider owner-occupiers less likely to default on their repayments (and lose the roof over their head). However, investor loans may have more flexible features and benefits that could help property investors better manage their property and their repayments.
2. What is the advertised rate and comparison rate?
A handy way to compare the total cost of different home loans is to look at both the advertised rate and comparison rate. While the advertised rate is the interest rate charged on the loan, the comparison rate combines the cost of interest plus standard fees and charges into a single percentage figure. This is a great way to get a better understanding of the true cost of a loan.
3. What are the fees and features of the loan?
Not all of a home loan’s fees and charges are included in its comparison rate. Consider checking for any extra costs, such as application fees, ongoing fees and exit fees, that you may need to pay.
Further, some mortgage lenders have special offers for new customers, such as interest rate discounts or even cashback offers. You may also be able to take advantage of helpful features, like offset accounts and redraw facilities, which can assist in reducing your interest charges.
If having a competitive feature or cashback offer is important to you, ensure you factor this into your home loan comparison.
4. How long would you need to repay the mortgage?
Most home loans terms could last between 20-30 years, and the loan term can affect how much you pay. Shorter loan terms typically come with higher repayments but lower overall interest costs. In contrast, longer loan terms often offer lower monthly repayments but may result in higher interest costs over the life of the loan.
You coulduse a repayment calculator to work out your monthly repayments for different loan sizes and terms. This could help you select a suitable loan term that allows for affordable monthly repayments while also considering your long-term financial goals.
5. How does the home loan compare against the rest?
A quick way to estimate the cost and flexibility of a home loan before you enquire is to look at a comparison table. Comparison tables help you to compare apples with apples, as you can filter down a range of home loan options based on your needs, and view them side by side. This allows you to easily compare your options, and see how they rank based on rates, fees and monthly repayments.
You can also look at the home loan’s Real Time Rating™ , which more closely indicates a home loan’s overall value. You can also compare some of the top-rated home loans on the RateCity Leaderboards, or look for which mortgages have won a RateCity Gold Award.
6. Do you need help from a broker?
Talking to a mortgage broker is one way you can help make sense of the mortgage maze. These home loan experts can look at your finances and recommend mortgage deals that may suit your personal goals and financial needs.
Brokers can also negotiate on your behalf to help you get a better deal, provide access to exclusive home loan offers, and manage your mortgage application on your behalf, to help save you time and hassle.