Selecting the right home loan

Selecting the right home loan can feel overwhelming with the number of factors you can compare. But home loans aren’t forever, and you may always be able to consider refinancing if your current home loan no longer suits your needs and budget.

Let’s explore what factors are important to compare when searching for your best home loan option, and how to easily compare home loans and create a short list that suits your needs.

What to look for in a home loan

There is no one size fits all approach when it comes to home loans as there are a multitude of factors that can impact the overall cost and flexibility of the loan. This may include:

• Interest rate – A significant factor that can impact the overall cost, the interest rate is a rate charged by the lender on top of your loan principal (amount owing). A higher interest rate doesn’t always mean a more expensive home loan though, as it’s important to weigh up the fees involved too.
• Fees – A home loan lender may charge you several fees with your home loan, such as upfront fees like application fees, or ongoing fees like annual fees. Some lenders may waive these fees, so it’s worth keeping an eye out for savings options.
• Features – The home loan may come with helpful features like an offset account, redraw facility or the ability to make extra repayments without penalty. These features may be associated with higher rates or fees, which can be important to balance when comparing your options.
• Loan term – The length of time you repay the home loan – typically 25-30 years. The longer the loan term, the smaller your monthly repayments but more interest you’ll be charged over time, and vice versa for shorter loan terms.
• Interest rate type – Choose between making variable rate payments, which are subject to market fluctuation, or fixed rate payments, which locks in your interest rate over a fixed period (typically 1-5 years).
• Repayment type – You may be able to opt for making principal and interest repayments or choose interest-only repayments. The latter means much more affordable mortgage repayments (typically for a period of 1-5 years), but you will not chip away at your principal, so when the interest-only period ends your repayments may be much higher. This option is popular amongst investors looking to get the greatest return on their investment property.

How to compare home loans in Australia

RateCity's home loan comparison tools are designed to do the hard work for you by helping you narrow down and compare home loan options based on your goals and preferences.

Comparison tables

RateCity’s comparison tables may help you to compare apples with apples, by allowing you to narrow down your search to the products that best suit your specific needs side by side. Just use the filters to search by interest rate type, borrow amount, lender type, features, repayment options and more.

Mortgage Repayment Calculator

A Mortgage Repayment Calculator may help you to calculate how much your repayments may be based on different home loan options. You may be able to view your estimated weekly, fortnightly, or monthly repayments, total interest payable, total amount payable, plus your repayment schedule.

RateCity also has several other calculators that may come in handy at different stages of your home buying process, so it’s worth looking at these too.

Real Time Ratings™

RateCity's Real Time Ratings™ may be a helpful tool when comparing how much value a home loan product might offer you. The rating system gives each home loan a score out of five stars, based on loan costs and flexibility, factoring in your loan size, deposit amount and borrowing type. If you’re struggling to narrow down your short list of home loan options, Real Time Ratings™ may be able to help illuminate your ideal option for your first or next home loan.

Compare home loans in Australia