Best home loan interest rates
To find the one of the best available rates on your home loan, there are a number of factors you’ll need to consider. The rate you can get will depend on your personal financial circumstances, so even if you can’t find the perfect loan straight away, there may be changes you can make that will improve the deals you’re offered.
Interest rates on loans are often presented in different ways, and can be difficult to understand. When you’re making your choice, you should look at the comparison rate, which also takes fees into account and is designed to give you a straightforward way of working out what is the best home loan interest rate.
Your credit history
One major factor that will influence the rates available to you is your credit history. The better your credit rating, the lower the rate you will be able to negotiate, while if you have bad credit you may sadly find that you are ineligible for many of the cheaper loans. You can improve your credit by always paying bills on time and making sure any money you borrow is paid back as agreed.
The other major factor that can help you access lower interest rates is the LVR – or Loan to Value Ratio – that you are seeking. If you have a big deposit to put on the property you want, the LVR will be lower than if you only have a small deposit. This will mean your lender is taking less of a risk, so may be able to offer a lower rate.
Fixed rate loans
Fixed interest rates are usually slightly higher to begin with but because they won’t change, you don’t have to worry about having to pay more if the RBA cash rate goes up. You’ll always know what your payments will be, which can really help if you’re on a budget.
Variable rate loans
Variable rate loans usually offer the cheapest rates to begin with and they can be even cheaper if the national interest rate falls. The flip side of this is that they can also become more expensive if it rises. They often come with special features than can help you save money overall.
Split rate loans
Split rate loans allow you to fix a portion of the loan, giving you stability, but also allow you to take advantage of some of the flexibility of a variable rate loan. They can help you to balance saving money with minimising risk.
Many lenders try to attract borrowers by offering introductory rates so you will pay less for the first few months of your loan. In some circumstances you may be able to switch lender partway through the duration of your loan so that you can take advantage of this kind of deal more than once.
A lot of people whose job it is to sell home loans are not working according to a strict set of rules but have some flexibility in the deals they make. If you can persuade them you’re a responsible person and that their risk will be low, they may be willing to offer you cheaper interest rates.