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How to choose a home loan

Rates and fees last updated on

Selecting the right home loan is a big decision. Help yourself make the right one by learning how to choose a home loan.

There are many different types of home loans that you can choose from to make your property owning dreams a reality. Below are some of the most common types of home loans:

Rates

Variable: A variable home loan is a loan where the interest rate is not locked in. With a variable rate home loan, your interest rate fluctuates in line with the official cash rate set by the Reserve Bank of Australia (RBA). Variable rate home loans are good for those who want to take advantage of potential low interest rates and generally come with more features. However, you must be prepared that the interest rate will move up and down. In this regard they are less secure than a fixed home loan.

Fixed: With a fixed rate home loan, your interest rate is locked in for a fixed period - usually between 1 - 5 years. Fixed home loans tend to be more secure and allow for better planning as you can work out your repayments upfront, and have the peace of mind knowing that your interest rate will remain unchanged during the fixed period. However, these loans tend to have less flexibility and you may miss out on a potentially lower interest rate. With some fixed loans, you may also not be able to make additional repayments.

Split: As the name suggests, a split home loan is one that is split between variable and fixed rates. Part of your home loan is variable and part is fixed. This potentially allows you to get the some of the benefit of both loans and have the security of a fixed rate, while still being able to take advantage of potential rate changes with a variable rate.

Regular home loans vs package loans
Title

Another choice you have is between a regular loan and a packaged loan. A packaged loan is different from a regular loan as you can package your loan with other financial products from the same lender, such as a credit card or a transaction account. Packaging your loan usually comes with discounted rates and lower fees.

Documentation types

Low doc: Low doc home loans are appropriate for those who have difficulty showing documentation of their employment and income, such as those who are self-employed. Low doc home loans are flexible loans designed for those who are self-employed because you don’t have to show evidence of savings or income. This type of loan may also be appropriate for someone who is a new Australian or a full time investor who can’t prove their income. Your credit history will be checked with these loans and you’ll usually have to pay higher fees or interest rates, or only be able to borrow a maximum of 60% of the property value.

Full doc: Full doc home loans require you to meet the normal documentation standards required to complete your home loan application. This means evidence of your income, debts and assets.

Rates last updated July 29th, 2017
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.48% $0 $375 p.a. 85% Go to site More info
UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% Go to site More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage of a 100% offset account along with no annual or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
ING DIRECT Orange Advantage Loan - $150,000+ (LVR <=80% Owner Occupier, P&I)
A fully featured home loan with an offset account and discounts available. $1000 cashback offer available for loans over $300k. Terms and conditions apply.
3.79% 4.11% $0 $299 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.85% 3.86% $0 $0 p.a. 90% Go to site More info
State Custodians Low Rate LOC - LVR 80% to 90% (Owner Occupier)
Borrow up to 90% of property's value and pay no application fee.
3.79% 3.82% $0 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.84% 4.86% $0 $0 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.88% 4.89% $0 $395 p.a. 95% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.99% 3.99% $0 $0 p.a. 110% Go to site More info
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
Finsure Home Loan Deal
Enjoy a low variable rate with no application fee.
3.69% 4.03% $0 $299 p.a. 80% Enquire now More info
P&N Bank & Home Loan & Bag
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.99% 4.02% $395 $0 p.a. 80% Go to site More info
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
No application or ongoing fees and a competitive 2 year fixed rate.
3.74% 4.81% $0 $0 p.a. 95% Go to site More info
Select Encompass Credit Union Special Offer 2 Year Fixed Rate Home Loan
A fixed rate loan with limited fees and a competitive interest rate.
3.74% 4.15% $0 $0 p.a. 95% Go to site More info
Beyond Bank Low Rate Special Home Loan - LVR <70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.83% 3.83% $0 $0 p.a. 70% Go to site More info
Auswide Bank Variable Home Loan Plus with Freedom Package - $150K+ LVR <= 90% (Special Offer, Owner Occupier)
A high maximum LVR home loan with redraw facility and additional payments.
3.69% 4.08% $0 $395 p.a. 90% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.84% 4.22% $0 $395 p.a. 95% Go to site More info
Mortgage House Advantage Variable Home Loan - 70 (PAYG Special No Offset)
A home loan with a competitive interest rate and flexible repayment that has a maximum LVR of 70%.
3.64% 3.66% $0 $0 p.a. 70% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.79% 4.46% $0 $375 p.a. 85% Go to site More info
QT Mutual Bank Mortgage Saver Home Loan
A low rate home loan with no application or ongoing fees. Note that to be eligible for this loan you must be QLD resident.
3.95% 3.95% $0 $0 p.a. 95% Go to site More info
4.59% 4.90% $0 $0 p.a. 95% Enquire now More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.99% 3.99% $0 $0 p.a. 85% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
Get access to a redraw facility and offset account without the annual fee.
4.19% 4.19% $0 $0 p.a. 90% Go to site More info
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
A low variable rate loan with no application or ongoing fees.
4.09% 4.11% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
Package your home loan to get discounts on your interest rate and other financial products.
4.39% 4.78% $0 $395 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier, P&I)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.99% 4.77% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
4.14% 4.92% $0 $0 p.a. 95% Go to site More info
4.59% 4.93% $0 $0 p.a. 95% Enquire now More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier P&I)
A competitive loan with flexible features. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.59% 5.01% $0 $395 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Standard Rate, P&I)
Split your loan for free with one of the lowest fixed home loan rates.
4.19% 4.86% $0 $0 p.a. 95% Go to site More info
Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate (Owner Occupier, P&I)
Borrow up to and fix in a 3 year home loan rate. Access your account via internet and phone banking.
4.39% 5.42% $300 $10 monthly ($120 p.a.) 95% Enquire now More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.89% 4.78% $0 $0 p.a. 95% Go to site More info
ANZ Simplicity PLUS Home Loan - Special Offer (Owner Occupier, P&I)
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
4.03% 4.07% $0 $0 p.a. 95% Enquire now More info
3.78% 3.79% $600 $0 p.a. 90% Enquire now More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.80% 3.81% $0 $0 p.a. 95% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 4.99% $0 $395 p.a. 95% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.99% 4.98% $0 $395 p.a. 95% Enquire now More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years, P&I
Lock in a discounted fixed rate with a low service fee.
3.88% 4.88% $0 $395 p.a. 95% Enquire now More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
Earn Velocity points on a competitive variable rate home loan with flexible features.
3.79% 3.92% $0 $10 monthly ($120 p.a.) 80% Enquire now More info

How to compare home loans

Rates

One of the most important elements to compare are the interest rates. This includes both interest rates and comparison rates. The comparison rate will help you identify the true cost of the loan so it’s important to compare comparison rates and look for the lowest comparison rate. Also, look out for any rate discounts you may be able to get or be eligible for.

Fees

Fees are another important part of your home loan that can lead to larger costs down the track. This is why it’s important to be aware of all the fees you may be liable for and compare loans based on fees. There are a range of fees you need to look out for and compare such as:

  • Application fees
  • Legal fees
  • Settlement fees
  • Exit fees
  • Account-keeping fees
  • Annual fees

You should be able to find detailed information about the fees a home loan has in the Product Disclosure Statement (PDS) of each individual loan.

Features

Some loans have more features than others. It’s important to first decide what features are most important to you in a home loan and then compare home loans based on the features that matter to you. Some features you should compare and questions you should ask include:

  • Can I redraw additional payments I make?
  • Can I make additional repayments?
  • Are there branch networks?
  • Can I open an offset account?
  • Can I split my loan?

Compare home loan features

Incentives

File board

Incentives are also important to compare among home loans. One incentive to look out for is if you can waive any fees if you meet any requirements or conditions. This is a great incentive to assist you in saving money. Some home loans also offer incentives such as the ability to earn Qantas Points just by establishing and paying off a home loan, or sweeteners such as free holidays. Another incentive you may also receive is a cashback. This is when you get a cash rebate after your loan is settled. Another common incentive is discounted rates. These types of incentives give you more than just a regular home loan so it’s important to compare.

Eligibility

Not everyone will be eligible for every type of loan and certain loans may be more suited to people based on their borrowing situation. Some home loans may be restricted based on the square meterage of the property, your income, employment status (e.g. those who are self-employed should consider low doc loans), how much you need to borrow, if you’re an Australian resident or not, and your age. Compare home loans based on your eligibility for them.

Don’t let the stress of finding the right home loan prevent you from purchasing your own home. Choosing a home loan no longer needs to be difficult now that you know what to look out for and what to compare. Start your own home loan comparison today to find the right one for you, or check out one of finder.com.au’s home loan calculators to get a better understanding of your borrowing capacity.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)

A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

IMB Budget Home Loan - LVR <=90% (Owner Occupier)

Get a competitive rate without features you may not use.

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.

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