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Mortgages are expensive. A tiny difference in the interest rate can save you thousands in the long run. But there's more to getting a good mortgage rate than just looking at the interest.
Read on to learn how to compare lenders and rates to find the mortgage you need. Or you can start comparing loans in the table below.
Compare mortgage rates for November 2017
What's on this page?
If you want the sharpest home loan interest rate possible, there are a few factors that will put you in a better position.
- Savings. Most lenders will require proof that you are financially responsible. This means that you are going to have to show that you have some savings. By putting your savings in as a down payment you are also taking on some of the risk, which makes most lenders more comfortable about giving you a loan with a more attractive rate. A good savings history also demonstrates to a lender that you have financial discipline.
- Good credit history. It's worth checking your credit file before you apply for a home loan so you don't run into any nasty surprises. Generally, a better credit score will improve your chances of being approved for a competitive rate.
- Know your property and financial goals. Do your research and find out which type of loan is most suited to your needs and what the best type of property is for you. Once you know exactly what you are looking for, it's much easier to find a home loan with an attractive rate.
When you're looking for a home loan, make sure you compare products on rates, fees and features.
1. Interest rates
The interest rate is the biggest cost associated with your loan, which is why you really need to shop around to find the best rate in your loan type. Remember, though, that the interest rate isn't the only cost associated with a home loan.
2. Don't forget the fees
When shopping for a home loan, most people tend to focus on the interest rate, and while it is an essential component that needs to be evaluated, it's definitely worth checking out what other fees you might be charged. You need to look at annual fees, exit penalties, mortgage insurance, ongoing account maintenance fees, valuation fees, application fees and more.
3. Look for handy features
You might also want to look into home loans with flexible features, such as offset or redraw accounts, portability or split facilities. All these features can help you take control of your home loan and pay off your mortgage debt quicker, but you should be aware that they often come with fees.
What is the average mortgage interest rate in Australia?
Here at finder we track the average interest rates for Australian mortgages. The graph below is updated monthly, and tracks the average rates for fixed and variable loans.
Once you start shopping around for a home loan you will discover that there are different types of mortgages available. Before you compare them, it's important you are aware of the most common types of loans, which will enable you to make an informed decision:
A variable rate loan features an interest rate that can rise or fall depending on market conditions. These loans usually come with lower interest rates than fixed rate loans and more features too.
The problem with a variable rate loan is that a sharp increase in the rate could add to your repayment costs significantly. A drop in interest rates, on the other hand, can make a variable rate loan more affordable.
A fixed rate home loan is one where the interest rate is guaranteed not to change for a set period of time, which usually varies between one and five years. Once the fixed rate period is up, the rate reverts to a variable rate, or your lender may offer the opportunity to fix for another period of time.
These home loans sometimes lack the features and flexibility of variable rate loans but offer certainty that your repayments won't change for the term of the fixed rate.
Split rate mortgages let you divide your loan into fixed and variable portions. You can generally decide on the ratio of the split yourself. For instance, you could allocate 30% of the loan at a variable rate and 70% at a fixed rate.
The benefit in doing this is that you can balance the potential savings of a cheaper variable rate with the greater security of a fixed rate. It really is the best of both worlds.
Watch: Fixed versus variable interest rates explained in 90 secs
The comparison rate
Yet another piece of the mortgage rate puzzle, the comparison rate is the interest rate plus the cost of fees that comes with the loan. It's designed to give you a true idea of the cost of a loan. By law, all loans must display a comparison rate alongside their interest rate. But these comparison rates are calculated on a relatively small borrowing amount. Given the growth in Australian property prices it's important to work out the comparison rate based on your actual loan amount.
Crunch the numbers
With a mortgage calculator you can get a clear idea of how an interest rate will affect your repayments. Use the calculator below to determine how the interest rate on a home loan and the amount you borrow determine your repayment costs.
Can I get a better rate with an online lender?
Non-bank lenders who operate entirely online may offer very competitive mortgage rates. This is partly because they don't own physical bank branches and thus have lower costs. It's also due to fierce competition in the market.
So I should definitely go with an online lender then?
Not necessarily. Again, competition is fierce, so you can still get a great rate with a standard lender. Also, rate isn't everything. Offset accounts, low fees and extra repayment options all affect your final rate. And while many online lenders have loans packed with useful features, there are many that don't. So do your research.
I'm dissatisfied with my current mortgage rate: can I switch?
While you need to be aware of the fees you might have to pay for switching, there's nothing stopping you from comparing your options. This is true whether you're two years into your current mortgage or twenty.
How should I research mortgages?
- Check out customer reviews and comments online.
- Speak to your current bank and see what home loans they offer.
- Talk to people in your life about their experiences with their lenders.
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