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BSB 806 015

Home loan comparisons

If you're unsure of what you should be looking for when it comes to buying your home, comparing what's out there is always a good option.

How to compare home loans

When you purchase a property, chances are you'll need a home loan… but do you know how to compare interest rates to secure the best deal? Comparing home loans is essential to finding the best loan for your financial circumstances. Below, we outline some key things to keep an eye out for when it comes to deciding which home loan is right for you. 

Where to start

When you're choosing between home loans, how do you get started?

When comparing home loans, the interest rate is very important; however you shouldn't make your decision on the interest rate alone. Instead of rushing into choosing a home loan, first consider:

  • How quickly you wish to pay the home loan off; and
  • What you can afford to repay each month. 

Your own financial circumstances and your long-term goals will influence what kind of home loan you should be looking for. 

Now you've decided how much you can repay per month, what's next?

Home loan features

Although home loan vary between banks, there are some common ones that you may want to consider when reviewing your home loan options:

  • Ability to make extra repayments
  • Offset accounts
  • Redraw facilities

How you choose your home loan depends on what features matter to you. For example, you might choose a home loan with a slightly higher interest rate because it lets you make extra repayments when you can afford. You may also opt for a higher interest rate if you want the freedom to redraw your additional funds at no further cost to you.

Interest rates

Although choosing the right home loan for you means more than just comparing interest rates, it's important to understand the most common types of interest rates and how they can affect your monthly repayments.

To help you compare home loan interest rates, here's a rundown of the ones you’re most likely to come across.

Variable rate

Variable interest rates can change during the course of the loan, based on the market. Since your repayments change when the interest rate does, it's harder to predict your monthly repayments in advance for the full term of the loan. However, variable rate loans often offer more flexibility, through features such as redraw facilities and the ability to make extra repayments.

Fixed rate

While fixed rate loans generally offer less flexibility, the interest rates can be locked in for up to five years, giving you certainty over the rate you’ll be paying for your fixed period. This makes it far easier to plan for the cost of your repayments in advance.

Interest only

With interest only loans, the homeowner pays only the interest charged each month along with any applicable fees for up to five years. The interest rate may be higher across these loans and they often offer less flexibility than some other home loans on the market.

Split loan

Split loans let you divide your loan into portions with different interest rates and benefits. The split loan is generally considered a good compromise between the pros and cons of both variable and fixed rate home loans. This way, you can experience both the flexibility of a variable rate loan as well as the security of a fixed rate loan. How you choose to divide the loan is entirely up to you.

Charges

Home loan charges can sometimes be overlooked as a major consideration when choosing your home loan. They vary depending on the home loan you choose, but they can typically include: 

  • Monthly maintenance fees
  • Upfront fees including title insurance and legal fees
  • Loan fees including fixed rate break costs, late repayment fees and redraw fees, and
  • Discharge or payout fees at the end of the loan. 

Make the comparison

Whether you're comparing home loan interest rates or deciding which features matter to you, it's important to take the time to ensure that your final choice is right for your circumstances. Start by deciding the type of home loan rate that you want (variable, fixed or split) and then compare the relevant home loans on offer.

The quickest and most convenient way to compare home loans is by using our Home Loan Comparison Calculator.

Taking the time to pick the right home loan for you is always worth the investment.

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