Best home loan rates
Getting the best interest rate for your home loan is an important consideration because the lower your interest rate, the less your repayments will be month to month. While this is important, it’s also essential to consider the comparison rate on your home loan as it includes any hidden fees and charges that can often be included in a product. The comparison rate also makes it easy to compare different products side-by-side - apples for apples.
The interest rate on your home loan is the percentage of interest you pay on the amount you owe the bank. The lower the rate, the less your repayments will be.
If you have a variable home loan, this interest rate will be decided by your lender and depend on a range of factors such as market conditions, the RBA cash rate and other considerations. Be aware that banks can lift or drop rates at any time so while you might be on a good rate initially, it’s important to keep an eye on what rate you are on and what other lenders are offering over the life of your loan.
If you choose a fixed-rate home loan instead, the interest rate will remain the same for the fixed term period you choose (typically between 1 and 5 years). Keep in mind that even though you might have chosen the best interest rate on the market at the time, your fixed home loan rate might not be so attractive if the cash rate drops and your bank follows suit. Conversely, if your bank’s variable rate rises in this time it might put you ahead.
Before you sign up to a fixed rate loan it’s a good idea to understand what features it does and doesn’t include, such as the ability to make extra repayments, as these products can sometimes be less flexible than their variable counterparts. Additionally, find out what the fees and charges are applicable over the life of your loan, including the revert rate after your fixed term expires, as this can often be higher than market rate.
A comparison rate is different to an interest rate because it factors in the other expenses associated with your home loan including most of fees and charges you could incur, and the revert rate if there is an introductory period. For this reason it is a useful tool for deciding between loans that may have a similar advertised interest rate but in reality will cost you different amounts over the life of your loan.
The revert rate of a home loan is the interest rate you will pay on your loan following the introductory or fixed term period. While not all loans have a different interest rate for the introductory period it is advisable to pay close attention to the ones that do before signing up.
These loans may have an advertised interest rate that appears to be the best home loan rate available but the revert rate may be a lot higher than other loans on the market and as a result, make the product less cost effective in the long run.
Choosing a home loan
If you are ready to start comparing and choosing a home loan the comparison table on RateCity is a good place to start. You will be able to look at the interest rate, comparison rate and fees of different mortgages side by side to find some of the best deals available.