Home Loans from 1.77%
Find home loans from a wide range of Australian lenders that best suit your needs, whether you're investing, refinancing or looking to buy your first home. Compare interest rates, mortgage repayments, fees and more.
Finding a low home loan interest rate can be as simple as looking at a list of home loans, sorting them by their rates, and making your home loan comparison from there. However, the home loan with the lowest interest rate may not be the best mortgage for you.
First home buyers, refinancers, property investors and owner occupiers can all benefit from comparing a variety of home loan options. Look at the interest rates, but also pay attention to the fees, features and other benefits to find the best home loan for you. Start by making your very own home loan comparison right now.
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Borrow up to 80%
With a discounted variable interest rate and no upfront or ongoing fees, you may be able to minimise the cost of your owner-occupied home loan.
Borrow up to 60%
The more of your home you pay off, the lower your rate could be. This low rate is avialbe for borrowers with equity of 40% or more.
Fixed - 3 years
Borrow up to 70%
Owner occupiers with deposits of 30% or more can lock in a low fixed rate for three years, with no ongoing fees.
Borrow up to 80%
Extra benefits include an HSBC Relationship Manager to guide you through the home loan process, and a complimentary Feng Shui report on your property!
Borrow up to 80%
Borrow up to 80%
Borrow up to 70%
Fixed - 3 years
Borrow up to 95%
Fixed - 3 years
Borrow up to 80%
Fixed - 3 years
Borrow up to 80%
Borrow up to 85%
Borrow up to 60%
Borrow up to 80%
Fixed - 2 years
Borrow up to 80%
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What is a home loan?
A home loan or mortgage is a large amount of money that you borrow from a bank or other lender to buy a house or apartment. As the borrower, you pledge your home as "security" or "collateral" for the loan. This means you give the lender the right to take possession of the property if you fail to repay the loan. In legal terms, this is known as "mortgaging" your home, so home loans are also known as mortgage loans.
Because the amount of a mortgage loan is so large, the lender gives you many years to pay it off. However, the lender also has that claim on the home as security, making the home loan less risky than a personal loan or business loan, so the interest rate is usually lower.
Why should you compare home loans?
Every home loan is different, and no two mortgage offers are the same. Because your home loan will likely be one of the biggest commitments you’ll make in your lifetime, it’s important to compare not just the cost of different home loans, but also the value these mortgages could offer you and your household.
By comparing the interest rates, fees, features and benefits of home loans from different banks and other mortgage lenders, you can work out which home loan deals may best suit your financial and lifestyle situation, now and in the future. Remember, the best home loan for you may not be the best home loan for the next person.
Who provides the best home loan deals?
You could get a home loan simply by contacting your local bank, but there are many more options available, including:
- other large and small banks
- mutual banks
- building societies
- credit unions
- other non-bank lenders
The best mortgage lender for you will be the one offering a home loan with rates, fees, features and benefits that suit your needs and your financial situation.
How do I get the best home loan interest rates?
Mortgage lenders typically offer their lowest interest rates to the borrowers who can comfortably afford their mortgage repayments and are unlikely to default on the loan.
Some of the factors that could affect your home loan interest rate include:
- Your income and expenses: Do you earn enough money from your job to comfortably afford home loan repayments on top of your other household expenses?
- Your deposit: The more of your home loan you can afford to pay as an upfront deposit, the lower the interest rate you may be offered. A low deposit home loan (anything less than 20 per cent of the property value) will typically have a higher interest rate and may require lenders mortgage insurance or help from a guarantor.
- Your assets: If you already own other assets, such as a car, shares, or savings, a lender may offer you a low home loan interest rate. This is because even if you experienced financial troubles, the value of these assets could help cover the cost of your repayments.
- Your other outstanding debts: If you already owe money on a car loan, personal loan, credit card or another home loan, a lender may be less confident about lending you more money, and more likely to charge a higher interest rate. Paying off your outstanding loans or reducing your maximum credit limit could help to improve your application.
- Your credit score: If you pay your bills on time and have repaid loans in the past, you should have a good credit score and be offered a low home loan interest rate. But if you’ve had money troubles in the past, such as defaulting on your loan payments or declaring bankruptcy, you may have bad credit and be charged a higher interest rate.
- Your loan purpose: If you plan to live in the property as an owner occupier, you may be offered a lower interest rate than if you were buying the property to rent out as an investor.
Home loan fees and the comparison rate
As well as interest, many mortgage lenders also charge fees on their home loans, including:
- Annual fees or monthly fees
- Establishment fees or application fees
- Discharge fees
- Other fees associated with the home loan’s features and benefits.
Sometimes a home loan with a low interest rate but high fees and charges can actually cost more than a home loan with a higher interest rate and no or low fees and charges.
A home loan’s comparison rate combines the cost of interest on a loan with its standard fees and charges. Looking at the comparison rates for different loans can quickly give you a better idea of which options may cost more in total.
What are the different types of home loans?
There is no ‘one size fits all’ home loan. Different home loan products offer different features and benefits and may be better suited to different borrowers.
Owner Occupier home loans and Investor home loans
If you’re buying a home to live in, you’re an owner-occupier. If you’re buying an investment property to earn money from rent and/or capital growth, you’re an investor. There are different home loan options available for investors and owner-occupiers.
Owner occupier home loans often have lower interest rates and fees than investor home loans. Because owner occupiers are motivated to keep a roof over their head, most lenders consider them less likely to default on their home loan repayments than investors.
Investor home loans may have higher interest rates and fees than owner occupier home loans. However, they may also offer flexible special features and other benefits that may be useful to investors, such as longer interest-only periods.
Principal & Interest and Interest Only home loans
Different home loan repayment types can affect how much your mortgage may cost, both in the short term and the long term.
A home loan’s “principal” is the money you’ve borrowed and need to pay back. In most home loans, each of your mortgage repayments will be made up of part of the principal, plus an interest charge based on the amount still owing. Each repayment will bring you one step closer to paying off your mortgage and owning your property outright.
Some lenders will let you pay just the interest charges on your mortgage for a limited time, such as from one and five years, or longer for investors. This helps make your mortgage more affordable from month to month, relieving some pressure on your budget.
However, because interest-only payments don’t reduce your principal, your loan will likely take longer to pay off, meaning you’ll end up paying more interest in total. It’s also important to watch out for bill shock when your mortgage reverts back to principal and interest repayments at the end of the interest-only period.
Variable Rate and Fixed Rate home loans
Even if you choose a home loan with a low interest rate, this may not be the rate you’ll be paying by the end of your loan.
Most home loans charge interest at a variable rate. If you have a variable home loan, your lender may increase or decrease its variable interest rates, and your minimum mortgage repayments may rise or fall accordingly.
You may be able to fix your home loan interest rate for a limited time, such as from one to five years. This keeps your mortgage repayments consistent for simpler budgeting, and you won’t be charged extra if your lender raises variable rates. However, you’ll also miss out on interest savings if your lender cuts variable rates. It’s also important to watch out for bill shock when your fixed rate home loan reverts to a variable rate home loan.
What options and features are available on home loans?
A home loan with the right features and benefits can make a big difference to your lifestyle and may help you achieve your financial goals.
While there are a wide range of features available from mortgage providers, three of the most popular are extra repayments, redraw facilities, and offset accounts.
If you pay more than the required minimum onto your mortgage each month, the extra money will go directly onto your loan’s principal, reducing the amount you owe. Because your interest charges are calculated based on your current principal, extra repayments today can help you to pay less interest in the future, clear your debt faster, and own your home outright sooner.
Some home loans don’t allow extra repayments or limit how much extra you can put on your mortgage. For example, if you have a fixed rate home loan, you may need to stick to a predetermined payment plan. Check with your lender before you apply.
Monthly, fortnightly or weekly repayments?
Sometimes making weekly or fortnightly mortgage payments rather than monthly repayments can help you pay off your loan faster. This is because while there are 12 months in a year, there are 26 fortnights. By effectively making one extra monthly payment per year, you can shave a little time and money off your mortgage.
Some home loans will let you “redraw” any extra repayments you’ve made on your home loan. This can help you confidently put part of your savings towards paying off your home loan and lowering your interest charges, as you can still put this money back in your pocket if you need it.
Keep in mind that some banks charge redraw fees, limit how much you can redraw from your home loan’s extra repayments, or limit the number of redraws you can make per year. Check the terms and conditions before you apply.
An offset account is a savings or transaction bank account that’s linked to your home loan. Any money in this account is used to “offset” your mortgage when interest is calculated on your loan.
For example, if you owed $300,000 on your mortgage, and had an offset account holding $10,000, the bank would calculate interest on your home loan as if you only owed $290,000. This can help you save money on interest charges.
Remember that the more features a home loan includes, the more likely it is to charge higher interest rates and fees. Compare the potential value of a home loan’s features to the extra costs you may need to pay.
How much can I borrow for a mortgage?
Before applying for a home loan, it’s important to get an idea of how much you can afford to borrow and comfortably repay. If you borrow too much money, you risk ending up in mortgage stress, meaning the lender may decline your mortgage application.
You can use a mortgage calculator to find out how much you can borrow, simply by entering some details of your income and expenses.
Alternatively, you could enter your preferred loan size, term length and interest rate to calculate the repayments, then work out if you can afford the loan on your current budget.
What is mortgage stress?
Mortgage stress is when you’re at risk of being unable to afford your mortgage repayments if you’re hit with surprise expenses, such as car repairs or medical bills.
Different lenders define mortgage stress differently. One popular benchmark is that if more than one-third of your household income is going towards your mortgage, you may be in mortgage stress.
You can use RateCity’s Mortgage Stress Calculator to work out if your home loan repayments could put your finances at risk.
How will my salary affect my home loan?
Your level of income will be one of the main factors that affect the size of your home loan. The more money you take home from your job, the more you could potentially afford to pay in home loan repayments. This may allow you to borrow more money to buy a property, making more options available to you.
Most mortgage providers will mainly focus on the salary from your job when calculating if you can afford a home loan. Other less-regular income sources, such as interest earned on investments or money earned from bonuses or overtime, may not be counted in full.
You can use a home loan calculator to estimate how much you can borrow on your current salary.
If you’re a freelancer, a contractor, or run your own business, you may not be in a position to provide the typical proof of income that some lenders require, such as payslips from an employer. Low-doc home loans may allow you to buy a property without providing as much paperwork, though their interest rates may be higher.
How much do I need for a home loan deposit?
The more you can afford to pay as an upfront deposit on a property, the better the home loan deal you may be offered. Many home loans with low rates and special features will ask for a deposit of 20 per cent or more.
You may be able to get a home loan with a smaller deposit of 10 per cent or even 5 per cent of the property’s value. While you can save up a smaller deposit much faster, a deposit of less than 20 per cent usually means you’ll need to pay for Lenders Mortgage Insurance (LMI), which can be expensive.
What is LMI?
Lenders Mortgage Insurance (LMI) is an insurance policy that covers the risk of a borrower defaulting on their home loan repayments. LMI only protects the lender providing your mortgage and does NOT protect the borrower (that’s mortgage insurance and/or income protection insurance).
LMI is typically required if you’re borrowing more than 80 per cent of a property’s value in your mortgage and paying a deposit of less than 20 per cent. This is sometimes called having a Loan to Value Ratio (LVR) of 80 per cent or more.
LMI can add thousands to tens of thousands of dollars to your mortgage’s upfront costs. The higher your LVR, the more you may need to pay in LMI. Before you apply for a low deposit home loan, consider using an LMI calculator to estimate the costs.
Who do I need to speak to when applying for a home loan?
Once you’ve done your research with mortgage comparisons, it’s time to take the next step on your home buying journey.
If you want a home loan from a specific bank or mortgage lender, you could visit a branch, give them a call, or even chat online about making an application. Some mortgage providers also offer mobile lending services, where someone will come and meet with you to discuss home loan options.
If you’d like more help choosing a home loan, you may want to contact a mortgage broker. These experts can look at your personal finances and recommend specific home loans for you. They can also negotiate with lenders on your behalf to help you get a better deal and may have access to exclusive home loan offers that aren’t normally advertised.
Visiting a mortgage broker is usually free. Rather than charging fees to borrowers, most mortgage brokers are paid commissions by banks when they successfully sign up new home loan customers. But even though brokers are paid by banks, they work for borrowers. If you’re worried that a broker may have a conflict of interest, ask them how they’d be paid for different home loans.
Step by step – How to apply for a home loan
- Check your finances – compare your income and expenses to the cost of home loan repayments, as well as the deposit, stamp duty, and any other upfront fees and charges that may apply.
- Collect financial documents (e.g. payslips, bank statements, bills etc.) to confirm your income and expenses.
- Fill out a lender’s mortgage application form.
- Get pre-approval, where a lender agrees in principle to provide a loan, but you or the lender can still walk away.
- Make an offer on a property.
- Credit check and valuation. The lender will check your credit score (based on your history of managing money) and calculate the value of the property to make sure you haven’t over-borrowed.
- If your application is approved, sign the formal home loan offer and contract.
- Prepare for settlement, which is the legal transfer of the property from one owner to another. A solicitor or conveyancer can help confirm that everything is done correctly.
- That’s it! Time to move in or start looking for tenants.
What is a cooling off period?
A cooling off period is a length of time that follows signing a contract to purchase property. During this period, a buyer can choose to terminate the agreement without being in breach of contract and losing their deposit. This gives you a window of opportunity to change your mind about a property purchase if your circumstances change, or you decide it’s not right for you.
The exact rules around how cooling off periods work varies from state to state, so it’s important to learn more about how cooling off periods work and check the facts before you sign on any dotted lines.
How do I refinance a home loan?
Refinancing a home loan means swapping your current mortgage for another. Borrowers refinance for many reasons, including:
- To get a better deal: Get a lower interest rate, cheaper fees, or more useful features and benefits.
- To borrow more money: Upsize to a bigger house or renovate your current property.
- To consolidate other debts: Add your credit card debts, car loans or personal loans onto your mortgage to enjoy a lower interest rate (though you may end up paying more total interest over the long term).
Refinancing a home loan still requires a deposit, but rather than just using your savings, you can use the equity in your current property.
Your equity is the current value of your home, minus the amount you still owe on your mortgage. If your property has increased in value since you bought it, you may have more equity available than you realise. This may make it easier to refinance to a home loan that better suits your needs.
|AAPR, Comparison Rate or Real Rate||Three ways of saying the same thing. The Average Annual Percentage Rate (AAPR), Comparison Rate and the Real Rate refer to interest rates plus fees and charges rolled into a single percentage rate for ease of comparison.|
|Amortising Loan||The most commonly used loan structure for a mortgage, which requires set repayments of principal and interest over a period of time.|
|Break Cost||Fees charged by your lender if you exit your loan early, most often applied if you have a fixed interest rate.|
|Bridging Finance||Helps you to “bridge” the gap between the sale of one property and the purchase of another.|
|Capped or Tunnel Loans||Capped loans limit how high your loan’s variable interest rate can go, while Tunnel loans limit both how high and low a rate can go.|
|Conveyancing||The process of transferring legal ownership of a property from one party to another. Legal fees on a property purchase are called conveyancing fees.|
|Deposit||The amount of cash you need to contribute towards your home loan application.|
|Fixed Rate Loan||A mortgage with interest rates that are locked in for a certain period of time.|
|Interest Capitalisation||An option to add interest charges to your total loan balance for a limited time, rather than paying it as you go.|
|Introductory or Honeymoon Rate Loan||A mortgage offering a discounted interest rate for an initial introductory period (the “honeymoon”), before reverting to the higher standard rate.|
|Lenders Mortgage Insurance (LMI)||An insurance policy that safeguards the lender in case a borrower defaults on their mortgage. LMI is typically required for mortgages with an LVR higher than 80% (or a deposit of less than 20%), with the borrower required to pay the cost.|
|Loan to Value Ratio (LVR)||The size of your home loan compared to the value of your property. For example, if you paid a 20% deposit on a property, and took out a mortgage for the remainder of its value, you’d have an LVR of 80%.|
|Mortgage Offset||A saving or transaction account linked to your home loan, which included when calculating interest charges. For example, if you had a $300,000 home loan and a 100% offset account holding $20,000, you’d be charged interest as if you only owed $280,000 on your mortgage.|
|Ongoing Fees||Fees are charged periodically over the life of the loan.|
|Overdraft||A line of credit, typically secured by the equity in your property, allowing you to borrow extra funds if required.|
|Parental Leave||A type of repayment holiday offered by some lenders when you become a parent.|
|Portability||An option to pick up your loan and take it with you when you move houses.|
|Progressive Drawdown||When building a home rather than buying, funds can be accessed in small sums at various intervals to suit the building process, rather than as a single lump sum at the beginning.|
|Redraw||The ability to withdraw extra repayments from your loan if you need the money in the future.|
|Refinancing||Taking out a new loan to pay off an old one. Refinancing may allow a borrower to enjoy more favourable interest rates, fees, features or benefits.|
|Repayment Holiday||An option to take a temporary “holiday” from loan repayments when you experience proven hardship, such as an unexpected loss of income.|
|Revolving Line of Credit||Essentially a giant overdraft, where money can be borrowed, repaid, then withdrawn again.|
|Salary Loan||A mortgage where your payments can come directly out of pre-tax income from your employer as a salary sacrifice, which can have tax benefits.|
|Split Loans||A split loan is a home loan where interest is charged on part of your balance at a fixed rate, and part of your balance at a variable rate, providing you with a mix of security and flexibility.|
|Stamp Duty||Stamp Duty is a State Government tax on the sale and transfer of land and property.|
|Switching Fees||The costs and charges involved when refinancing your home loan from one lender to another.|
|Upfront Fees||Fees charged at the start of your home loan to help cover the cost of processing your application.|
|Variable Rate Loan||A home loan where the lender may raise or lower your interest rate depending on a range of economic factors, including the national cash rate set by the Reserve Bank of Australia.|
Sally is the Research Director for RateCity and a regular commentator on television and radio about personal finance matters. She is passionate about helping everyday Australians get access to affordable finance options, and helping people save money through smart budgeting and easing everyday expenses. Sally is a contributor to news outlets including Fairfax, News Ltd and Money Magazine, among others.
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Frequently asked questions
Who has the best home loan?
Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.
To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you.
How can I calculate interest on my home loan?
You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.
If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.
How do I calculate monthly mortgage repayments?
Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.
Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.
Can I get a home loan if I am on an employment contract?
Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.
If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.
How much of the RBA rate cut do lenders pass on to borrowers?
When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates.
Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers.
As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.
What is a cooling-off period?
Once a home loan’s contracts are exchanged between the borrower and the lender, a five-day cooling-off period follows, during which the contracts may be cancelled if needed.
How much deposit will I need to buy a house?
A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.
While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.
What is a comparison rate?
The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.
The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.
In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.
What does pre-approval' mean?
Pre-approval for a home loan is an agreement between you and your lender that, subject to certain conditions, you will be able to borrow a set amount when you find the property you want to buy. This approach is useful if you are in the early stages of surveying the property market and need to know how much money you can spend to help guide your search.
It is also useful when you are heading into an auction and want to be able to bid with confidence. Once you have found the property you want to buy you will need to receive formal approval from your bank.
What fees are there when buying a house?
Buying a home comes with ‘hidden fees’ that should be factored in when considering how much the total cost of your new home will be. These can include stamp duty, title registration costs, building inspection fees, loan establishment fee, lenders mortgage insurance (LMI), legal fees and bank valuation costs.
Some of these fees can be taken out of the mix, such as LMI, if you have a big enough deposit or by asking your lender to waive establishment fees for your loan. Even so, fees can run into the thousands of dollars on top of the purchase price.
Keep this in mind when deciding if you are ready to make the move in to the property market.
What is stamp duty?
How can I pay off my home loan faster?
The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.
Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.
Remaining loan term
The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.
What happens to my home loan when interest rates rise?
If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.
When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.
There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.
How much deposit do I need for a home loan from ANZ?
Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:
- A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
- The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
- If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).
What are the responsibilities of a mortgage broker?
Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.
In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).
These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for, actually meet your needs, and don’t prove unnecessarily challenging for you.
Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.
How do I refinance my home loan?
Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.
Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.
What is a variable home loan?
A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.
What is an interest-only loan? How do I work out interest-only loan repayments?
An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.
Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.
While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.
What is a fixed home loan?
A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.