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If you have been paying off your mortgage diligently, chances are you’ve accrued some equity over the years. Equity can be used for a number...
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AgreeWe all know how important interest rates is when it comes to home loans, but there is another rate borrower should look at before choosing a home loan. This is called the comparison rate.
A comparison rate takes into account all the cost associated with the home loan taking into account interest rate, ongoing fees and charges. This is expressed as a single percentage which is used to compare other home loan products across different lenders.
Lenders will take the following into consideration when advertising their comparison rate
When reviewing your loan, most borrowers would look at the interest rate without understanding the features and the overall cost of the loan product. This means some lenders would advertise a rate to borrowers that may look attractive at first but may not be suitable to their personal situation after considering the range of fees and charges attached to the loan.
To curb this, the Australian government introduced the comparison rate as a mandatory requirement to show the true cost of your home loan based on a set of assumptions so borrowers don’t need to work out how much it cost them if they decide to hold on to the loan for the long term.
The comparison rate can be misleading because a comparison rate is based on a set of assumptions as discussed above. This means for any loans larger than this or if borrowers review and refinance their loan then comparison rate provided by lenders won’t be as helpful, if at all.
Our comparison rate calculator is easy to use. All you’ll have to do is key in a few important details.
Although the comparison rate calculator is a simple tool for borrowers to compare the cost of the home loan product for the life of the loan, you should always keep in mind of certain fees such as redraw fees, stamp duty costs and break cost fee. This may not be included in a comparison rate.
When searching for the right product, looking at the interest rate alone can be misleading, you should speak to a mortgage specialist that understands what you need so they can work out which home loan is right for you.
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Read MoreAny calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn’t take into account any product features or any applicable fees.
*2.19% Interest rate based on an Owners Occupied, Principal and Interest, 3 years fixed period, minimum loan size of $250,000, maximum LVR of 80%, over a 30 year term. Eligibility subject to servicing requirements, contact one of our specialised mortgage brokers for more information.
^3.27% Comparison rate based on a loan of $250,000 over a 30 year term. WARNING: The comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan.