Comparison rate calculator

The comparison rate on a home loan is an example rate that adds together the cost of fees plus the interest rate. But a personalised comparison rate calculator can help you figure out your actual comparison rate.

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By

Rebecca Pike

Updated

Fact checked

Key takeaways

  • Lenders display an example comparison rate for every home loan, but it's not always accurate because it is based on a hypothetical example.
  • Using a comparison rate calculator can help you figure out your own personal home loan comparison rate.
  • Just enter your loan's interest rate (ignore the fixed rate if your loan is variable), loan amount and the loan fees.

Check out more of Finder's helpful home loan calculators

How to use the personalised comparison rate calculator

To get your personalised rate you'll need to enter:

  • Your loan term
  • Your loan amount
  • The fixed interest rate and fixed period (if you have one)
  • The ongoing variable rate
  • Any upfront fees
  • Any ongoing monthly or annual fees
  • Any loan discharge fee

Once you've entered all the relevant details simply click 'Calculate' to see the comparison rate for your loan.

You'll also see your regular repayment amounts, a figure that represents the total amount of repayments you will need to make towards your loan, and a graph that demonstrates how long it will take you to pay off your mortgage.

Of course, you should also keep in mind that certain fees - including redraw fees, stamp duty costs and early termination or break fees - are not included in a comparison rate.

What is a comparison rate?

The comparison rate takes into account the interest rate and a range of fees and charges that apply to a loan, and is represented as a percentage figure.

It was introduced as a way to stop lenders advertising a great low interest rate for their loan and then slugging borrowers with a whole bunch of hidden fees. The comparison rate tends to be higher than the advertised interest rate on most home loans.

Using the comparison rate when comparing home loans can help you make sure you're not paying too much in fees.

How important is the comparison rate?

In the past, some lenders would lure in borrowers with an interest rate that was too good to be true, and the borrower wouldn’t realise there was a range of fees and charges attached to the loan.

Borrowers got hit with surprise application, establishment and ongoing loan fees. In an effort to put a stop to this, the Australian government introduced the comparison rate in 2003 as a mandatory requirement to show the true cost of a mortgage.

However, the comparison rate is not without faults. A comparison rate can only use a certain number of examples, and in the case of home loans this is usually a $150,000 loan taken out over a 25-year loan term (rather than the industry-standard 30 years). This means for any loans larger than this, the comparison rate provided by lenders won’t be as helpful, it at all.

This is why a personalised comparison rate calculator is useful.

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Our expert says: Go beyond the comparison rate

"I use the default comparison rate on a home loan as a quick indicator of high fees. If the comparison rate is much higher than the interest rate, I know I need to look closer at the loan fees. But I think the average borrower is better off using a loan repayment calculator and looking at the cost of their monthly repayments each month using their loan's interest rate. Then you can add any ongoing monthly fees on top of that. One-off fees like application fees are a cost you only pay once."

Senior Money Editor
Rebecca Pike's headshot
Written by

Senior Money Writer

Rebecca Pike is Finder’s senior money writer, with over 10 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise, A Current Affair, 9News, and Sky News, and contributes expert analysis to publications like Yahoo Finance and The Latch. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio

Rebecca's expertise
Rebecca has written 241 Finder guides across topics including:
  • Home loans
  • Cost of living
  • Budgeting
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