Get the best home loan for you

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How much can you save by refinancing in 2024?

We estimate that the average person could save up to $8,856 a year by switching to a lower rate:

• The average Australian home loan is now $625,050 (according to the ABS).
• The average variable interest rate loan in Finder's database is 7.48%. The lowest available variable rate on the market is 5.69%.
• Assuming a 30-year loan term, if you switched to that lower rate your monthly repayments would drop from $4,362 to $3,624. That's a saving of $738 every month, or $8,856 a year.

Data is correct as of 03 July 2024. This savings example is a hypothetical estimate only. The lowest rate is for an owner-occupier loan with 80% LVR and may not be the lowest rate across the entire market.

Market update by Rebecca Pike – Finder's senior home loans writer

What is the best home loan for you?

David Smith, chief customer officer of mortgage broking firm Aussie, says when you're deciding which home loan to get, it pays to keep in mind that every borrower is different.

"The first consideration you should make when choosing a home loan is to understand how much you can afford," Smith explains. "That doesn't just mean the maximum amount you can borrow – it also means the maximum you're prepared to pay each month for your loan repayment."

From there, you can plan a budget with your home loan repayments in mind.

"Don't forget, when you purchase a property, there are a number of other upfront costs to cover, including stamp duty – so make sure you factor those extra costs in too," Smith says.

Here are some examples of typical borrowers. While all borrowers are looking for the best home loan to suit them, they all need something a little different.

How do I get the best deal on a home loan?

There are 3 things every borrower needs to look at when hunting for the perfect home loan: rates, fees and features.

The lower the rate, the better

The interest rate determines your borrowing costs, and the lower the rate, the less interest you pay each month.

Let's say your loan amount is $500,000. You choose a variable rate with a 30-year loan term and principal-and-interest repayments (this means you repay the loan amount plus interest at the same time).

The best home loan will always have a lower interest rate because it lowers your monthly loan repayments:

But there's more to a good home loan than the interest rate.

Avoid big fees

Look for a loan that doesn't charge many fees. While home loan fees seem small in comparison to your repayments, they do add up.

Get the mortgage features you need

Home loans with added features can offer you more flexibility in how you repay and manage your loan:

• Offset accounts can help you cut down your interest repayments.
• Redraw facilities let you take out extra money you've paid into your mortgage to use in emergencies.
• Loan portability lets you move your home loan from one property to another without refinancing.

Why the best home loan is different for every borrower

We've explained what the average borrower needs to do to find a great home loan. But every borrower's needs are slightly different. The best home loan for each borrower depends on their short- and long-term plans, and the reason they're buying a property in the first place.

Here are some examples of quite specific borrowers and what they'd need to look at to find the ideal home loan.

A property investor with a mortgage on the family home

Plenty of investors haven't paid their own home loans off yet. While this means having 2 loans at the same time, it opens up some unique opportunities too.

For this type of borrower, the best approach could be as follows:

1. Make sure your owner-occupier loan has a low interest rate. Focus on repaying this debt as fast as possible. The interest you pay on your home loan is not tax deductible. But it is on your investment loan.
2. Choose interest-only repayments on your investment loan. This allows you to minimise your investment loan repayments while focusing on your own home loan first. This makes sense because the interest is tax deductible too.

This is just one approach for a property investor to take. Another is to look for a home loan bundle or pivot loan that lets you combine your 2 loans, with a higher rate on your investment loan and a lower rate on your home loan. This can be effective for tax purposes.

A cautious home buyer with plenty of extra money in savings

Let's say you have a 20% deposit and you're looking for a home loan. Obviously, the best loan for you has a low interest rate. But let's say you also have a lot of extra money sitting in your bank account earning very little interest.

And let's say you don't have any desire to invest that money. You want to play it safe. In this case, the best home loan really is one with a 100% offset account.

This means you can park your savings in the home loan and still access it whenever you need it. But by saving the money there, you're cutting down the amount of interest your lender charges you.

You've signed a contract to buy and you're running out of time

If settlement day is fast approaching and you haven't got a home loan approved, the best home loan is the one that a lender will approve quickly.

This could mean a few things. You might abandon the hunt for a better deal and just talk to your own bank. But banks can be slow. You might get faster loan approval with an online lender.

And if you're stuck, a mortgage broker will know which lenders can process your application faster. They can be a real lifesaver when you're running out of time.

Need more help finding a good loan? Talk to a broker

If you haven't got the time or energy to do it yourself, talk to a broker. Mortgage brokers are professionals who have access to a panel of lenders. They can find you a product that matches your financial needs and also help with your application.

Talk to a qualified mortgage broker today.

Compare more home loan options here

Your home loan questions answered

• Which lenders have the best home loan rates?

  At the moment, the home loan market is incredibly competitive. Lenders big and small are offering very competitive rates. In the past, you could usually find the lowest interest rates by looking at online lenders rather than the Big Four. But now the gap between the various lenders is much smaller.

  And it's important to look at loan features too. A lender may have the market's lowest rate, but if the loan doesn't allow extra repayments or doesn't have an offset account (and you want one), then it's not the best loan for you.

  And if you've bought a house and are racing to settlement day, the best lender for you is the one who can approve your loan in time.

• What are the current home loan rates in Australia?

  There are many different home loan rates on the market, with different types of loans having higher or lower rates. To get a good sense of what's a competitive rate in the current market, take a look at our current home loan rates guide.

• Is 3% a good home loan interest rate?

  Before interest rates began rising in May 2022, 3% would have been a good interest rate. Currently, interest rates are closer to 6%. Interest rates can vary depending on your circumstances and equity or deposit, so be sure to compare interest rates closely.

• Are package home loans any good?

  Many lenders offer very low interest rates on package home loans, especially fixed rate package loans. There is nothing wrong with a package loan. It just means you can combine the home loan with a bank account (that usually offsets your loan interest, saving you money) and a credit card or other products.

  The package usually means you can avoid fees on some of the products. But you pay an annual package fee instead. This can cost a few hundred dollars a year. But you pay it every year of the loan.

  To work out if a package loan is right for you, be sure to factor in the cost of the package fee. And decide if you really need the other products in the package. It could be a convenient option to have all your banking and loan products in one place. Or you might be better off finding a low rate loan elsewhere and avoiding the package aspect altogether.

• Can I ask my lender for a lower rate?

  It never hurts to ask for a discount. The worst your lender can do is say no. Some mortgage brokers claim they can get discounts for their clients, but you can always ask your lender yourself. It helps to be in a good financial position before asking for a lower rate, of course.

Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 530 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips

Co-written by

Sarah Megginson

Head of editorial

As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Channel 7 news, Nine news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media. See full bio

Sarah's expertise

Sarah has written 186 Finder guides across topics including:

• Home loans
• Personal finance
• Budgeting and money-saving tips
• Managing the cost of living