Home loan comparison

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Compare more home loan options

Home loan guides

9 common types of home loans

There are quite literally thousands of home loan products on the market for a range of different purposes. Having this many options can be overwhelming, leading many to rush into making a bad choice.

What is lenders mortgage insurance?

Buying a property without a chunky deposit could see you whacked with the oft-dreaded cost of lenders mortgage insurance. But in a different sense, the time it takes to save up the deposit could also cost you.

What is LVR?

In the home loan market, a common term you may hear is loan-to-value ratio, or LVR. We explain exactly what it is and how it can affect your home loan interest rate.

First home owners grants

If you’re looking to buy your first home, you should be aware of First Home Owner Grants, which exist to assist new homeowners in buying their dream home. See what grants are available in each state and territory.

Calculators

home loan repayment calculator

Mortgage repayment

how much can i borrow

Borrowing power

mortgage repayment frequency calculator

Repayment frequency

1. How our mortgage comparison works
2. How to compare home loans
3. How to save money on a home loan
4. Types of home loans
5. Popular home loan features
6. Tips on taking out a home loan

How our home loan comparison works

At Savings.com.au, we compare home loans from some of Australia’s biggest and most notable retail banksnon-banks and customer-owned banks. Here you can compare mortgages:

With our home loan comparison tables, you can compare the advertised interest rates, the home loan comparison rate (a better reflection of the loan’s true value), and what the minimum monthly repayments are based on a loan size of $400,000.

How to compare home loan rates

The interest rate is arguably the most important thing in a home loan, as a lower interest rate can save you thousands (tens of thousands even) of dollars over the course of the mortgage. While getting the lowest home loan interest rate you can is important, it isn’t the be-all-end-all, as it’s very possible a mortgage with a slightly higher interest rate might be more suitable to your needs.

That’s why when assessing a home loan, you should also consider:

1. Does the home loan have an introductory rate?

A home loan can have a low interest rate for the first couple of years, before reverting to a higher interest rate later on.

2. If it’s a fixed rate home loan, what’s the break cost?

If you break a fixed home loan term, the lender can charge you a break fee which could be thousands of dollars.

3. What are the fees on the home loan?

A home loan with a low interest rate can have high fees, whether they’re application fees, ongoing fees or fees for using products like an offset account. Check these fees as well as the comparison rate before applying.

4. Is the home loan interest-only?

Interest-only mortgages can be much cheaper for the first five years or so, but can have much higher repayments at the conclusion of the interest-only period, potentially leading to “repayment shock”.

Each of these things can make a high-cost mortgage look deceptively low, which is why you should really look at the comparison rate to see a more accurate representation of the loan’s cost. Also take into consideration the amount you’re borrowing on the loan and the loan term (how long it lasts). Bear in mind that paying more than the minimum repayments can save lots of time and money off your mortgage.

Thinking of buying a home?

Home – where foundations are set, families are built, stories begin and memories live on. It’s what many of us dream of – a comfortable place to call our own.

Sentimentality aside, a home is also probably the MOST EXPENSIVE thing you’ll ever buy. At a median value of around $516,713 (CoreLogic, June 2019), dwellings in Australia require a fair chunk of dough to be cooked up by the everyday punter. A quick browse of some property listings on different real estate apps will attest to that. So unless you’re flooded with cash, most of the funds will need to be borrowed through a home loan (otherwise referred to as a mortgage).

Median Dwelling Prices Around Australia

median-house-value-june-2020-corelogic

Source: CoreLogic Hedonic Home Value Index, June 2020 Results

Repaying this home loan can feel like ‘forced savings’, with money put towards the home as ‘equity’ to solidify it as the bedrock of your household’s finances. In that sense, paying off your property – an asset which can grow in value – could be seen as an ‘investment’ rather than a ‘cost’. But a scoop of your repayments are fed to the lender in interest. Over the life of the loan, this interest can knock you for six in cost figures.

How can you save money on a home loan?

To know how to save on a home loan, you need to identify where the costs are coming from. Essentially, you’ve got two main sources:

Interest rate: The ultimate money-muncher, interest makes up the majority of the home loan’s total cost.

Fees: While not as significant as interest costs, the upfront and ongoing fees of a home loan can stack up in the thousands. These home loan fees can include application fees, discharge fees, lenders mortgage insurance premiums and annual fees

Luckily, Australia’s competitive home loan market provides Aussie borrowers with ample opportunities to save on these costs by simply comparing home loans to find some of the best value deals. Whether you’re looking to save on a new home loan or an existing one, there are market-leading products available in today’s low-rate environment with comparison rates of under 4.00% p.a. Every basis point (0.01) of difference between rates could save thousands off the total cost of your home loan.

While securing a great deal on a home loan is the crucial part of the equation, there still are other things you can do to save money on your home loan, such as:

Not only can these methods reduce costs, but they may also help you pay off the loan earlier, granting you more years of debt-free freedom.

Popular home loan features

Offset accounts

Offset accounts are like savings accounts where the money stored in the account is offset against the balance of your home loan when interest is charged. This means you’re not charged interest on the full actual balance of your loan, saving you in interest costs. Offset accounts can be full (100%) or partial offset. On a full offset account, 100% of the funds in the account are deducted from the outstanding loan balance when interest is calculated. For instance, if you have a $200,000 mortgage and $20,000 on the offset account, you will only be charged interest on $180,000 each month. For a partial offset account, only some of the offset account balance is deducted from the outstanding loan balance. So assuming the same amounts from the previous example, a 50% partial offset account would charge interest on $190,000 each month.

Redraw facility

A redraw facility allows borrowers to make extra repayments on their home loan which they can ‘redraw’ later if required. It allows you to be flexible when repaying your loan. This is particularly useful if you have savings now that you want to put towards your loan, but you know that have an expense coming up in the future where that cash is required. Sounds similar to an offset account, doesn’t it? The main difference between redraw facilities and offset accounts is the availability of the funds. Money in an offset account can usually be withdrawn at any time (offset accounts sometimes come with an EFTPOS card to allow this), whereas redraw facilities often do not provide same-day withdrawal.

Taking out a home loan: 4 key tips

1. Compare home loan rates and lenders

Comparison is key to making the right choice of home loan. Compare everything from the different types of home loans, lenders, home loan rates and fees. A thorough home loan comparison can give you a huge advantage in the mission to land a great value mortgage that satisfies your requirements.

2. Get your financial documents in order

When it comes to applying for a home loan, you will need to provide the lender with a number of different financial documents. Having these documents prepared will shorten the application period.

So, do your research and find out what exactly are you expected to bring. Bank accounts, brokerage statements, payslips – having these ready beforehand them can save you a lot of trouble.

3. Borrow only what you know you can afford to repay

It goes without saying that it is only advisable to borrow as much as you know you can afford to repay. It might seem obvious, but many Australians make a fatal mistake when it comes to this, leading to years of ‘mortgage stress’. Just because a lender is willing to lend you up to a maximum amount does not mean you should borrow at that max. So be realistic. Know exactly what you can afford and do not compromise your home by borrowing more than that! Use a mortgage repayment calculator to help you estimate what your monthly repayments will be.

4. Don’t be afraid to ask for help

It is okay to be confused. So, if you don’t know exactly which loan features are right for your particular circumstances, be as clear as possible with your lender or mortgage broker when discussing what you’re trying to achieve, to allow them to help match you to the right loan to meet your needs. These people deal with lending every day, so do not be afraid to talk to them and ask them for help. Most of the time, apart from advising you, they will be more than willing to assist you in preparing and submitting all the paperwork.

Don’t rush into the decision, take your time, do a thorough lender and home loan interest rate comparison, ask around, get your financial documents in order and ask for help if needed! This decision would probably be one of the most important ones in your life, so do not take it lightly!

Frequently asked questions

1. How much deposit is required for a home loan?

The amount needed for a house deposit varies, but you'll usually need at least 5% of the property's value, which is an LVR (loan-to-value ratio) of 95%.

To avoid paying Lenders Mortgage Insurance (LMI) however, most lenders will require you to provide a deposit of 20% of the property's value.

2. What happens if I default on my home loan?

A mortgage default (missing a repayment by 90 days) won't bankrupt you but will require you to pay a late fee up to $200. This might seem relatively minor, but defaulting on your mortgage will also be recorded on your credit file, thus damaging your credit score.

Plus, missing a month or two of repayments will also increase the length of your home loan, which leads to greater interest charges over time.

3. What are the requirements for a home loan?

Applying for a home loan can be a lengthy process, but you can speed it up by knowing what you'll need:

  • A house deposit (at least 5%)
  • A credit history (a good score will improve your chances)
  • A stable income (the higher the better)
  • A lack of debts
  • Photo ID (driver's license, passport etc.)
  • Bank statements and payslips
  • Council rates for any other properties you own
  • Other documents such as the First Home Owner Grant
4. What is the home loan process?

The home loan application process can be quite lengthy but isn't too complicated. It will generally involve the following steps:

  1. Save for a deposit (the hard part)
  2. Find your perfect home or getting pre-approval first
  3. Gather your required documents
  4. Compare home loan providers
  5. A preliminary assessment by the lender
  6. Submit your application to the lender
  7. The lender completes a property valuation
  8. The lender approves or rejects the loan
  9. They send you an offer
  10. The loan is settled and the funds are advanced to you.

Read our home buying checklist for a complete breakdown of everything you need to know.

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Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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