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What's new in home loans in June 2021?

While low fixed interest rates on home loans has been the order of the day for the past few months, those days may be starting to come to an end. At the start of the year there were 32 four-year fixed home loan rates under 2 per cent, including from three of the big four banks. But now, the last four-year fixed rate under 2 per cent has been hiked.

There are still plenty of fixed rate offers available to fulfil the needs to Australian borrowers, who have become more receptive to fixed rate deals over the past year, according to a recent RateCity survey.

The survey also found that Australians are renovating their homes, with 37 per cent of respondents altering or renovating their homes in 2021. Also, 22 per cent of the respondents said that while they were saving for a holiday in the last year, they are instead using that money on a renovation, as they’re unable to travel due to COVID. Others have looked into financing their renovations with a home improvement personal loan, or by refinancing their mortgage.

Updated by Mark Bristow on 4 June 2021

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.

What is a home loan rate?

When you borrow money to buy a home or investment property, you'll need to pay this money back, plus an extra charge from the lender, called "interest". 

The interest you're charged on each mortgage repayment is based on your remaining loan amount, also known as your loan principal. The rate at which interest is charged on your home loan principal is expressed as a percentage. 

Your home loan interest rate is effectively the cost of buying the money you need to buy a property.

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 current mortgage 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. As well as the “Big 4” banks (ANZ, Commonwealth Bank, NAB and Westpac), there are a variety of non-bank mortgage lenders to consider, including app-based neobanks. 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: 

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 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 occupied 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.

Investment 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 repayments 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 during the fixed rate period, 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.

Extra repayments

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. 

 

Redraw facility

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.

Offset account

An offset account is a savings or transaction bank account that’s linked to your home loan account. 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.

 

TIP:

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 of a deposit do I need for a home loan?

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.

 

Which is the best bank for home loans?

Home loans are available from Australia’s big four banks (ANZ, Commonwealth Bank, NAB or Westpac) and smaller banks. You can also apply for home loans from credit unions, mutual banks and app-based mortgage lenders.

Home loans from bigger banks are more likely to offer a wider range of extra features and benefits, though you may pay more in fees and interest charges. A mortgage from a smaller lender may have a lower interest rate and cheaper fees, though it’s more likely to be a “no-frills” mortgage product, with fewer optional extras.

The best choice for you will depend on your financial situation, personal needs and credit history. The home loan with the lowest interest rate may not always be the best choice for you – sometimes you may enjoy greater value from a mortgage with a higher rate, but features and benefits that better suit your needs. 

It’s important to compare current mortgage rates from different banks and other lenders before you apply. Look for a loan that you’re confident you can afford, and offers features that suit your needs. You should also make sure you satisfy your bank’s lending criteria before applying.

 

How to compare home loans

There’s no such things as a “one size fits all” home loan – it’s important to compare a variety of mortgage options to work out which one may be right for you.

The best method to compare home loans may depend on your situation, though the following steps may be helpful:

Calculate your budget

There are a variety of mortgage calculators available to help you plan your mortgage. You could start with how much you want to borrow and how much you can pay as a deposit (including your savings plus first home owners grants and other related incentives) and find out what the repayments would be.

Alternatively, you could start from how much you can comfortably afford to pay, and use this to estimate how much you may be able to borrow.  

Compare advertised rates and comparison rates

The home loans with the lowest current mortgage rates may not be the best home loans for you, or even the cheapest. Sometimes fees and charges can make a low-interest home loan cost much more than you expect.

The comparison rate combines the cost of interest on a home loan with its standard fees and charges into a single percentage, so you can quickly get a better idea of how much a home loan may cost you overall.

Check the fees, features and other benefits

Not all of a home loan’s fees and charges are included in its comparison rate. Consider checking for any extra costs that you may need to pay, to avoid nasty surprises.

For example, several nonstandard fees and charges may apply when you utilise certain home loan features and benefits. This could affect the overall value offered by these features.

Some mortgage lender also have special offers for new customers, such as an interest rate discount for a limited time, or even cashback. Consider the value of these deals before you apply. 

Check Real Time Ratings™

A quick way to estimate the cost and flexibility of a home loan before you enquire is to look at its Real Time Rating™ from RateCity. Unlike traditional star ratings, Real Time Ratings™ are updated daily to provide an up to date indication of a home loan’s overall value.

One simple way to quickly compare some of the best-rated home loans in a category is to check the RateCity Leaderboards. Also, home loans that stay near the top of these leaderboards for six months or more may be considered for a RateCity Gold Award.

Consider help from a broker

If the home loan market is confusing you, a mortgage broker may be able to help. These home loan experts can look at your finances and recommend mortgage deals that may suit your personal goals and financial needs. They may also be able to negotiate on your behalf to help you get a better deal, and provide access to special home loan offers that are exclusive to brokers. Finally, a broker can help manage your mortgage application on your behalf, to help save you time and hassles.

How to compare home loans against the big 4 banks

ANZ, Commonwealth Bank, NAB and Westpac are four of Australia’s largest mortgage lenders. While their home loan deals are often competitive, other bank home loan rates may be worth consideration, along with offers from credit unions, online-only lenders and fintechs.

RateCity can help you to quickly compare bank home loan rates to the big four. Here’s how:

  1. Search our rate tables for a home loan that you’d like to compare to the big four banks.
  2. Tick the “Compare” box on the table – a popup should appear that includes the selected home loan.
  3. Click “Compare with big 4” – you will be taken to a new comparison page.
  4. You will be shown a table of interest rates, fees, features and benefits for your selected home loan, plus a similar home loan offer from each of the big four banks.
  5. Once you have decided which offer may best suit your needs, you can click Read More or Enquire Now to learn more about the offer or visit the lender’s website.

You can also choose to compare up to five different bank home loan rates side by side, simply by ticking the "Compare" box on each loan in the table, then clicking "Compare" in the popup.

Alternatively, if you select one home loan offer from the table, you can click "Smart Compare" in the popup, which will automatically select four similar bank home loan rates to compare side by side.

Step by step – How to apply for a home loan

  1. 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.
  2. Collect financial documents (e.g. payslips, bank statements, bills etc.) to confirm your income and expenses.
  3. Fill out a lender’s mortgage application form.
  4. Get pre-approval, where a lender agrees in principle to provide a loan, but you or the lender can still walk away.
  5. Make an offer on a property.
  6. 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.
  7. If your application is approved, sign the formal home loan offer and contract.
  8. 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.
  9. 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 long does it take to pay off a home loan?

Most mortgages have a loan term measured in decades, with 20 to 30 years being common. This assumes that you will make regular principal and interest repayments towards paying off your property. The longer it takes you to pay off a home loan, the higher the total cost of the loan may be. Keep this in mind before you consider refinancing onto a loan with a longer loan term.

However, it is possible to pay off a home loan early. If you make additional repayments onto your home loan, these will reduce the remaining principal owing. This can help to reduce your future interest charges, and bring your closer to making an early exit form your mortgage. 

 

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.

 

Financial Dictionary

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.

 

Popular home loan brands

Cashback

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Cashback

Cashback

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Cashback

Frequently asked questions

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

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. 

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 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.

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).

Is a home equity loan secured or unsecured?

Home equity is the difference between its current market price and the outstanding balance on the mortgage loan. The amount you can borrow against the equity in your property is known as a home equity loan.

A home equity loan is secured against your property. It means the lender can recoup your property if you default on the repayments. A secured home equity loan is available at a competitive rate of interest and may be repaid over the long-term. Although a home equity loan is secured, lenders will assess your income, expenses, and other liabilities before approving your application. You’ll also want  a good credit score to qualify for a home equity loan. 

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.

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

What is the Home Loan Rate Promise?

The Home Loan Rate Promise is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are two reasons it pays to check your rate with the Home Loan Rate Promise:

  • You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
  • If we can’t beat your current rate, you can claim a $100 gift card with our Home Loan Rate Promise*