Find cheap home loans with low interest rates and fees
The cheapest home loan for you may not be the cheapest for someone else. Everyone is different, so you need to determine which home loan is the cheapest based on your borrowing capacity, your deposit, the features you need and how soon you plan to repay your loan.
You can scroll down to read our expert guide on finding the right loan, how much you'll have to repay and how to speed up paying off your loan to find the cheapest home loan, or you can use the table below to compare today's home loans.
NAB Home Loan Offer
NAB Choice Package Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier) First Home Buyer Special offers a special rate with no application fee and a low ongoing fee.
- Interest rate of 3.69% p.a.
- Comparison rate of 4.92% p.a.
- Application fee of $0
- Maximum LVR: 90%
- Minimum borrowing: $150,000
- Max borrowing: $10,000,000
Today's home loan comparison
Rates last updated May 25th, 2017.
- Aussie Optimizer Variable Rate - LVR <= 80% (Owner Occupier + P&I)
Interest rate is now 3.86%
April 11th, 2017
- Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Interest rate is now 3.79%
May 8th, 2017
- Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
Interest rate is now 3.89%
May 8th, 2017
Aussie can save you time and effort by helping you research, organise and apply for your home loan. They compare thousands of home loans to help find the right deal for you. Fill out the form on the left and an Aussie Mortgage Broker will meet you at a time of your choosing to discuss your needs and help you find the right home loan.
Compare some current home loans for May 2017
|Home Loan||Interest rate (p.a.)||Comparison rate (p.a.)||Application Fee||Ongoing Fees|
|NAB Choice Package Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier) First Home Buyer Special||3.69%||4.92%||$0||$395 p.a.|
|UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)||3.74%||3.74%||$0||$0 p.a.|
|HSBC Home Value Loan - Resident Owner Occupier only||3.75%||3.77%||$0||$0 p.a.|
|Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)||3.64%||4.83%||$0||$0 p.a.|
Depending on your needs, the cheapest home loan could be:
- A low rate loan
- A low fee loan
- A loan with a shorter term
- A loan with added features
This is probably what most people have in mind when they they think about finding the cheapest home loan. A low interest rate makes a massive difference to the overall expense of a home loan. Just look below to see how much of a difference it can make, all things being equal.
Typically, low interest rates are offered on basic home loans, or loans from lenders who have been able to reduce their costs, such as online lenders. Sometimes lenders will also offer very low fixed rates as promotions to secure new business. Once the fixed period ends, the rate can revert to a less competitive variable rate, so be sure to ask lenders what their revert rate will potentially be.
It’s also important to consider the different types of rates on offer:
Standard Variable Rate
This is the standard headline rate on offer from the lender. It can change at any time, based on moves by the Reserve Bank of Australia, the lender’s cost of funds or regulatory change. Have a look at some of the reasons lenders change their rates.
Ongoing Discount Rate
This is a discount off a lender’s headline rate offered to entice borrowers, and can be dependent on factors such as special promotions, the borrower’s credit history and the loan-to-value ratio. Package loans can also offer discounts in exchange for opening transaction accounts and credit cards with the lender. Bear in mind that they also usually charge an annual fee, so be sure that the discounts outweigh this fee. Some package loans also offer discounted insurance products and fee waivers for other products.
These rates remain locked in for a predetermined period, usually one, three or five years. While borrowers can secure some certainty that their home loan repayment won’t rise for the fixed term, fixed rate loans also mean they won’t see the benefit from any downward move on rates.
Low rate loans: Pros and Cons
It’s important to look beyond the headline rate when considering a loan. Most loans have upfront fees, ongoing fees and discharge fees associated with them that can cost thousands.
The good news is that loan fees are sometimes avoidable. Many low fee loans will waive or reduce certain fees. Some lenders will also offer a cashback when you're approved, which can reduce the impact of any fees.
When comparing loans it's a good idea to look at fees and rates together. Some loans may have low interest rates but high ongoing fees, as is the case with most package loans. These home loans charge an annual fee of $200 - $400 per year, but offer discounted interest rates and upfront fee waivers.
If you're ever not sure if a low interest rate means a loan is actually cheap, one option is to look at the comparison rate. This is an interest rate which takes into account some of the fees you'll pay, and gives you a better idea of the loan cost.
What’s a comparison rate?
A comparison rate gives borrowers an idea of the true cost of a loan. It takes into account both the loan’s interest rate and any associated fees and charges, and expresses this as a single percentage figure. Remember, a low advertised rate might not seem so low when fees and charges are taken into account.
The quicker a home loan is paid off, the less total interest due. So even though the repayments for a 25 year home loan might look high compared to those of an identical 30 year home loan, the savings would be higher. Look below to see the difference in the total cost of two loans.
Why does this happen? With a longer loan term a borrower will be paying interest for longer. This makes the total cost of a loan much higher.
A 20 year home loan vs a 30 year home loan
|Scenario: $400,000 loan with an interest rate of 5%|
|30 years||20 years|
|Repayments: $2,147.29 per month||Repayments: $2,639.82 per month|
|Total interest payable over 30 years: $373,023.14||Total interest payable over 20 years: $233,557.51|
As you can see, in this example, repayments on a shorter term loan would be just under $500 more each month, but would save $139,465.63 in interest payable over that time.
Shorter loan term: Pros and Cons
There's a reason why banks advertise home loan features like offset accounts, interest only payments and loan portability. This is because they're popular features which can save savvy borrowers money. Here are a few common features offered on home loans.
Offset accounts can save interest, which means borrowers can pay off a loan sooner. An offset account is a transaction account linked to the home loan which reduces the amount of interest payable. For example, if you have a $200,000 loan and $10,000 in a 100% offset account, you will only pay interest on $190,000. There are 100% offset accounts, meaning every dollar in the account works to reduce the same amount on your loan, and partial offset accounts, where a percentage of each dollar offsets the interest due. Partial offset accounts are much rarer today, so you're likely to only encounter 100% offset accounts. Look out for monthly offset account fees - most lenders don't charge them, so if you come across a loan that does it might pay to look elsewhere.
Loan portability helps you to move your loan to a new property without the high costs of exiting a loan and taking out a new one.
Interest only payments
Interest only payments can reduce your repayments because you no longer have to pay the actual loan principal off. The downside of this is it can extend the loan term, and end up making the loan more expensive in the long run.
Unlimited extra repayments
The cheapest and most affordable home loan could be the one which lets you pay your home loan your way. This might mean not charging you penalty fees to make extra repayments. Note that while most lenders allow you to pay variable rate home loans off early with no problem, fixed loans will charge a penalty fee known as break costs. Many fixed rate loans today have an amount of extra repayments they will allow during the fixed term without charging penalty fees, so find this out if you're locking in a rate.
Loans with added features: Pros and Cons
Now that you’ve defined what money-saving characteristics best suit your needs, it’s time to find the home loan that best matches your circumstances.
Compare cheap rates
Compare some low rate and/or low fee home loans in the table above.
Compare loan features
See how much you could save by shortening your loan term
The loan repayment calculator below allows you to change the loan term to see the effect this has on the total cost of a loan.
What's the best way to find the cheapest home loan?
This depends on who you speak to, and it depends on what you're looking for. There's no one cheapest home loan for every borrower. Online lenders can be good to approach if you don't mind not having branch access. They are often able to offer cheaper products because of this. But sometimes banks will offer special low rates and fee waivers from time to time. They can also offer discounted rates as part of a package home loan.
If you feel that you might not know enough about home loans to find the cheapest, a mortgage broker could be a good option for you.
I'm looking to buy my first home, what's the cheapest home loan available?
The cheapest home loan can change from month to month, or even week to week during competitive periods in the market. A better option is to compare home loans based not only on the cost but also on how well it will suit you, and whether you're eligible for the loan.
A rate I've seen looks too good to be true, how can I know if I should trust a lender?
You should always be comfortable with the lender you're planning on going with. If you're not aware of a lender, try calling them up to find out about them and their service level before lodging an application. Speak to previous customers or read customer reviews on sites like Product Review. You can also try speaking to a mortgage broker to find out their experiences when dealing with them. Often, a little known brand might be funded by a larger bank, as is the case with NAB backing UBank, or Firstmac backing loans.com.au.
What are the cheapest home loan providers?
Home loan providers offering low cost loans used to be those which operate without branch networks such as online lenders. Today many traditional banks can match or even exceed the competitive home loans offered by these cheaper home loan providers, so it pays to look at all lenders when seeking a cheap loan.
Are fixed rates cheaper than variable rates or vice versa?
This will depend on the loans themselves. The major cost difference between a fixed and variable loan is the possibility of having to pay break costs if you try to leave a fixed rate loan before the term ends. If you don't leave a fixed rate home loan early this won't be a factor to consider. Another difference between the two loans is that variable rates can fluctuate, meaning they could go lower or higher than a fixed rate depending on the economic factors.
* The offers compared on this page are chosen from a range of products finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms "Cheapest", "Cheap", "Best" and "Top" are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.