A home loan comparison rate allows you to work out the true cost of your home loan by comparing the total cost among other banks. By law, all lenders must include “comparison rates” in their advertisements for home and personal loans to avoid consumers from being misled when it comes to choosing a home loan.
A comparison rate takes into account the total yearly cost of a loan, not just the interest payable. This number includes the cost of any fees and places them into one easy to compare rate. This means that you could be looking at two loans; Loan A and Loan B which both have a Standard Rate of 3.74%. It would seem based off of the standard rate that both loans are the same and either choice would be ideal. When you look at the two loans’ Comparison rates, however, Loan A has a comparison rate of 4.07% while loan B’s comparison rate is just 3.74%! Clearly, Loan A has a range of fees tied into it and this is something you should be aware of.
Are home loan comparison rates the only thing to take into consideration when choosing a home loan?
No. While it can be tempting to get caught up in the numbers and choose the loan with the lowest comparison rate, this could turn out to not work in your favour. A comparison rate only compares the upfront pricing of a loan. It does not take into account early repayment fees, government charges, as well as the various features a loan could have such as redraws and offset accounts and repayment flexibility. These vary widely among loans and can have a significant impact on the overall cost.
The selection of the best home loan for your situation is all part of a larger evaluation process – it’s not just a matter of selecting the loan that looks the best on paper. To truly maximise your savings and work within your needs, it is best to consult with a professional mortgage broker such as Seajay Mortgage Brokers. We can help you select the best loan for you without any additional fees or charges from us.
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