How to find your interest rate

Pop quiz, hotshot – what interest rate are you currently paying on your home loan? Could you name it off the top of your head?

Many studies in recent years have found that the majority of Australians with home loans don’t know their home loan’s current interest rate, with CUA stating in February 2016 that 60% of Australians don’t know what rate of interest they’re paying on their mortgage, and UBank finding in December 2015 that as little as 16% of Australians do know their interest rate. This is despite the interest rate having a major impact on any home loan’s affordability. 

Before you can start thinking too seriously about refinancing your home loan and getting a better deal, you’ll first need to find out what rate of interest you’re currently paying as a baseline to compare to other offers. Finding this information isn’t always as easy as it sounds.

Home loans for refinancing:

Here are five ways to find the interest rate on your home loan:

Check your lender’s list of rates

Many lenders will have a page on their website dedicated to listing and comparing the different home loans products they currently provide, including information such as interest and comparison rates. If you know the name of your home loan product, you can look it up in the list and see its details, including the interest rate.

nab-home-loan-interest-rates-compressor NAB’s interest rates for home lending

It’s worth remembering that not every home loan may be summarised on one of these pages, as lenders create new home loan offers and discontinue old ones all the time. If you’ve had your mortgage for a number of years, it’s entirely possible that your lender isn’t offering that particular deal to new customers any more, or has changed the name of the offer. Or perhaps a loan offer with the same name is currently available, but at different rates and terms to what you originally signed up for, especially if you have a variable rate home loan.

Check your mortgage statement

To help you keep track of what money going into your home loan (and if you have a redraw facility, any money coming back out), your lender will keep records of recent transactions and other updates to your mortgage in the form of statements, much like what you’d find for a more typical bank account. These statements may be sent to you once or twice a year, or even quarterly or monthly, depending on your lender, and include details around how much you’ve borrowed, how much you’re still owing, the remaining home loan term, and of course, your interest rate.

commbank-mortgage-statement The interest rate in the above CommBank statement can be found at number 3

Many lenders initially send your mortgage statements as physical paper copies for compliance reasons, though you often have the option to switch to paperless online statements that can be accessed via internet banking if you prefer electronic records.

Online Banking

Most lenders include options to conduct most of your banking over the computer, rather than over the phone or in person at a branch. If you have a home loan through one of the smaller non-bank lenders, it’s possible that they conduct ALL of their business online, and don’t have any branches or shopfronts available to visit.

By logging into your online banking, you can usually quickly and easily access basic information about your home loan, such as its current balance. You’ll likely also have the option to transfer extra available cash towards paying off your home loan.

Because lenders often design their online banking services to focus on making day-to-day transactions and transfers smooth and stress-free, rather than providing a lot of extra details, you may need to dig a little deeper into the different tabs and menus to find more detailed information on you home loan, such as its interest rate. 

anz-internet-banking-loan-details How to find your home loan details, including the interest rate, with ANZ Internet Banking

Mobile banking

Finding your home loan interest rate using your lender’s mobile banking app can often follow a similar process to doing so via online banking, with the biggest difference being that you’ll be doing so via your phone rather than on a computer.

Much like internet banking on a computer, mobile banking apps are often designed primarily with simplicity, speed and ease of use for making everyday transactions in mind, so accessing detailed home loan information via your phone may not always be straightforward, depending on your lender. 

westpac-mobile-banking-interest-rate-compressor How to find your home loan interest rate details with Westpac, including on Mobile Banking

Calling/visiting them!

call-centre-compressor

Yes, nobody likes waiting on hold, hearing for the thirteenth time that “your call is important to us”, and trying to convince speech recognition software to transfer you to a real person. But sometimes the direct approach is one of the simplest ways to find out your current interest rate.

Make sure you have all of your account information and other details required to confirm your identity handy, and your lender should be able to tell you your home loan’s current interest rate with relatively little fuss.

The same deal goes for visiting a bank branch – if your lender has an office nearby, you can drop in, take a number and wait in line to see if a teller can source your interest rate for you.

What next?

Once you’ve found your current interest rate, what’s the next step towards getting a better deal on your home loan? 

Well, assuming you already have a refinancing goal, whether that’s to save money, borrow more, or to pay off your home faster, the next step is to start comparing other home loan offers, both from your existing lender and others, to see if you can find an alternative that will help you reach your lofty goal. 

While comparing different home loans by interest rate is important, be sure to compare the other costs, features and benefits too, to make sure that you choose a refinancing home loan that provides great value for your money. 

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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.

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.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

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.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

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 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.

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. 

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.

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 the difference between fixed, variable and split rates?

Fixed rate

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.

Variable rate

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.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

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.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor.