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Be your own broker: five tools to make your home loan comparison easier

Be your own broker: five tools to make your home loan comparison easier

Gone are the days when you just relied on your childhood bank to approve you for a home loan and you accepted whatever interest rate it offered. There’s never been an easier time for borrowers to compare your home loan options to find the best loan that suits your budget and needs.

With a multitude of home loan comparison tools available for would-be borrowers, you may be able to calculate how much you can afford to borrow, filter down and shortlist some home loan options, discover your potential repayment amounts, fees, and stamp duty costs all by yourself.

Here are five tools to make your home loan comparison easier and help you to be your own broker.

Five key home loan comparison tools

  • Borrowing Power Calculator

Before you can start shopping around for your ideal property, you will need to have some idea of your spending limit. Traditionally, you may save up a sizeable deposit and apply with a lender for home loan pre-approval. In this process they may advise that you have been approved for, say, a $550,000 home loan, meaning you can use this figure as a benchmark at the auction.

A Borrowing Power Calculator helps to do this work for you. While the amount a lender may approve you for can differ depending on your financial situation and the market, it can be a great starting off point for your home loan comparison.

Simply enter some details like your income and expenses, as well as whether you are applying as a single or joint applicant. The calculator will display your estimated borrowing power in a range from low to high, as lenders have different eligibility criteria.

  • Comparison table

One of the most helpful tools in comparing home loans, a comparison table allows you to compare apples with apples. You simply enter general details, such as the loan amount and your deposit size, and a range of home loans will be displayed side by side, showing their interest rates, fees, and any features provided.

You can then sort these options by advertised rate if you’re hoping to find a lower-rate option. You may filter these down further by nominating whether you’re:

  • An owner-occupier or investor
  • Looking for a variable or fixed rate
  • Looking to pay principal and interest or interest-only
  • Wanting to bank with the big four or a smaller lender
  • After competitive features, like a redraw facility
  • Interested in a cashback offer

A comparison table may help you to make a short list of home loan options that best suit your needs and budget.

  • Comparison rate

Speaking of a comparison rate, this is another home loan tool that may help you to get a more “realistic” idea of how much a mortgage could cost you. Home loans will typically advertise their interest rate when promoting a product, but this is not the only ongoing cost a home loan could charge you.

You may be stung with several fees, such as application fees, annual fees or break fees, over the life of your home loan. A comparison rate is an interest rate that factors in the advertised rate and most of the fees to give you a truer to life cost for the home loan.

As the comparison rate was introduced in 2003, this measurement is based on a home loan size of $150,000 on a 25-year term. This is far lower than the modern mortgage (which is closer to $500,000+), with median dwelling prices in all capital cities in Australia significantly higher than this.

While the comparison rate may be a little outdated, it is still a helpful benchmark to show which home loans are charging high fees, if the comparison rate is a lot higher than the advertised rate.

  • Mortgage Repayment Calculator

A Mortgage Repayment Calculator can help borrowers to discover how much they may pay in ongoing mortgage repayments. You may base these calculations on your shortlist of home loan options from the comparison table or whatever calculations you’d prefer.

Simply enter the amount you want to borrow for a home loan, the interest rate or comparison rate, whether you are an owner-occupier or investor, the repayment type and ideal loan term (typically 25 or 30 years), and your deposit amount. The calculator will then display an estimation of your mortgage repayments based on these factors.

This can be helpful in your home loan comparison by showing you which options may be more affordable and better suit your budget.

  • Stamp Duty Calculator

One of the most frustrating parts of purchasing property is after saving long and hard for a deposit you find you need a large lump sum upfront to pay for stamp duty. This can range from thousands to tens of thousands of dollars, depending on your state or territory and the property value.

A Stamp Duty Calculator may help borrowers to not only discover how much you may pay in stamp duty but gain information on the total cost you may need for your property purchase. Each state and territory in Australia have different requirements around stamp duty.

If you’re a first home buyer, you may find that your state or territory offers you stamp duty exemption or a concession, depending on your property value. This is a government initiative to help make the cost of purchasing your first property more accessible. Check the government Revenue website for your state or territory for more detail on stamp duty exemptions and concessions you may qualify for.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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