Home loan interest rates are often the biggest cost-consideration of buying a home in Australia. When comparing home loans, finding a low rate should be one of your priorities, as it could save you thousands of dollars over the life of your loan.
In this guide you will learn:
The key to finding the lowest home loan interest is to simply shop around and compare all the options on the market. There are several ways to compare home loan interest rates, and you can look at the following factors:
This is a good way to get a high-level idea of how much interest you can expect to pay. Keep in mind that many comparison sites do not include the products of all lenders.
Mortgage brokers are intermediaries between the banks and borrowers. A good mortgage broker will:
Mortgage brokers are usually paid via commission from the lender when they arrange a loan. While this means the service is usually completely free for customers, it also means that mortgage brokers may push certain financial products or lenders who offer higher commissions.
If there are certain lenders you’d like to use, visiting each lender's website, checking out their rates and fees, and gathering information on your options is a good start. This will give you an in-depth idea of how much a home loan will cost with each lender.
|Bank||Product||Fixed period (years)||Interest rate (%)||Comparison rate (%)||Monthly repayment example ($)|
ANZ fixed home loan
Commbank fixed home loan
Westpac fixed home loan
NAB Tailored Home Loan
1 year basic
1 year fixed
Several lenders in Australia offer loans that have low interest rates and high fees, so the interest rate alone won’t always reflect the true cost of the loan. There are two important numbers to look at when comparing home loans:
There are two main types of interest rates offered by lenders: fixed and variable rates. Each type of rate has different pros and cons and will affect your mortgage repayment amounts, loan flexibility and total interest payable in different ways.
Variable-rate home loan interest rates are based on the market. If the cost of lending increases for lenders for whatever reason variable rates will increase. However, if the cost of lending decreases your variable interest rate may decrease.
Fixed-rate home loans have the same interest rate for whatever the fixed period is - this is usually one to five years but can be longer. After the fixed period ends your loan will automatically revert to a variable rate unless you enter another fixed-rate contract with your lender.
It’s possible to have a portion of your home loan on a fixed interest rate and the rest on a variable rate - this is known as a split rate home loan.
This option can provide some repayment certainty and protection against rising interest rates, while maintaining some certainty over repayments through the fixed-rate portion of the home loan.
Interest rate stays the same for a set period of time.
Your repayment amount will not change. If market interest rates increase yours will not.
Less flexibility than variable rate home loans. You may be charged fees for making extra repayments.
Interest rate goes up and down with market rates.
Rate will decrease if the market decreases. More flexibility.
Rate will increase if the market rate increases. Repayment amounts may change.
A portion of your loan is fixed, while a portion is variable.
Protect yourself against interest rate increases and gain repayment certainty with the fixed portion. Gain flexibility and make extra repayments with the variable portion.
May include extra fees.
Interest is by far the biggest cost of most home loans in Australia. That’s why it’s worth taking the time to shop around when you need a home loan and make sure that you’re getting a good, low rate.
There are a few easy ways that you can compare home loans including:
When comparing home loans keep in mind that the comparison rate is the most important number to look at. This figure includes the loan’s interest rate plus fees - the true cost of a home loan.
When choosing a home loan you should also know that interest is charged in more than one way, including fixed and variable rates. Fixed rates stay the same for a set period of time, while variable rates move up and down with the market. Both have their pros and cons and you should fully understand the difference before you start searching for a loan.
You’ll also need to know the difference between principal and interest home loans and interest-only home loans. Principal and interest is usually the way to go for most borrowers as interest-only loans can be risky and expensive over time.
Home loan interest rates are the interest charged on money borrowed from a lender. This will be expressed as a percentage of the total loan amount and included in loan repayments.
To find the lowest interest rates, compare home loans from several providers. To do this you can either get help from a mortgage broker, use home loan comparison websites or do your own research.
Owner-occupiers - those who live in the home they’re buying - may be charged lower interest rates than investors by some lenders.
Variable home loan interest rates are rates that change with the market. That means if market interest rates increase, you’ll pay a higher interest rate on your home loan and your regular repayment amount will increase (and vice versa if rates decrease).
Fixed home loan interest rates stay the same for a set period of time, usually one to five years. A fixed rate will give your certainty around your repayment amount and protect you from rising interest rates. However, if market rates decrease yours will not.
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