When shopping for a home loan, there are many essential comparisons to make, such as location, property, lenders, and – maybe the most crucial – interest rate comparison.
Trying to compare home loans and interest rates without using any tools or methods can make it difficult to keep track of everything. Luckily, there are many different ways to compare and find the best interest rate for your home loan.
But why are interest rate comparisons so important? And how can they all be so varied?
Interest rates differ depending on frequently shifting factors like overall market conditions, supply and demand, and your own financial situation and preferences.
Australia’s interest rate (also commonly referred to as the official cash rate) is subject to fluctuations, which can cause anxiety for borrowers who haven’t researched or compared rates beforehand.
It’s usually more straightforward to make decisions on elements like fixed rate or variable interest rates, but when you’re trying to compare different lenders with different interest rates, it can quickly get overwhelming – particularly if a comparison rate is a new concept for you.
So what’s the best way to determine the right interest rate for your home loan? Luckily, there are plenty of helpful methods for interest rate comparison.
Online Comparison Tools
One of the quickest methods to compare home loans and interest rates is by using a reliable online comparison tool. These are usually offered by lenders, but some are more reliable than others. These tools enable you to input the home loan amount and loan term you’re looking at, as well as other relevant information, and then filter down the lenders that suit those parameters.
This will allow you to see side-by-side comparisons of different interest rates offered by those potential lenders, as well as any fees involved.
This is an effective and easy way to compare lenders and their interest rates, and forecast things like your monthly repayments and loan principal amounts before you make your choice.
Here are a few popular online comparison tools and home loan calculators to get you started:
- MoneySmart Calculator: https://moneysmart.gov.au/home-loans/mortgage-switching-calculator
- Canstar’s Home Loan Comparison Calculator: https://www.canstar.com.au/calculators/loan-comparison-calculator/
Research Potential Home Loan Lenders
You can also find the perfect lender by checking out their website and their products for home loans.
Usually, you’ll be able to collect relevant information and tick off your must-haves, like whether they offer a variable interest rate, fixed interest rate or interest-only home loans for an initial period rather than the usual principal and interest repayments.
Finding that information yourself can help you feel secure that you’ve got the right information you need to make a smart decision. And if you can’t find the information you’re looking for, you can always contact the lender directly.
Sometimes a direct phone call is the most efficient way to compare loans, as it allows you to hear it straight from your potential lender. You’ll also be able to ask direct questions and get a better sense of what they’d be like as a lender of your particular credit product.
Keep Tabs on the Reserve Bank of Australia’s Interest Rates
Another important resource to keep an eye on is the Reserve Bank of Australia (RBA).
The RBA is an integral part of home loan comparisons, as it’s responsible for monetary policies and Australian interest rates. A big part of RBA monetary policies is the interest rate (also called the RBA cash rate), and setting the targets for this rate falls under its responsibility.
The RBA is the governing body that determines whether interest rates go up or down. It provides frequent updates on the cash rate on its website. This is a key research point, as any interest rate set by the RBA then becomes the benchmark rate for lenders.
Knowing what the RBA is doing through their website empowers you to be on top of any rate changes that might impact your choice of lender or interest rate plan.
Ask Your Mortgage Broker
Your mortgage broker can also help compare home loans, which is often the most in-depth option. Accessing home loan rates directly from a broker usually means you’ll have information on:
- Fixed-rate loans,
- Variable interest rates,
- Interest-only loans, and
- Offset account information.
You’ll also be able to ask about ongoing fees and charges such as annual fees, valuation and legal fees, as well as establishment fees and discharge fees.
This will allow you to have a clearer overview of the fees and charges associated with getting a home loan – which will give you an accurate picture of the total cost of your loan, both in terms of upfront requirements and long-term home loan repayments.
Key Takeaways
Being selective and doing your due diligence before deciding on home loans and interest rates is crucial if you want to find a mortgage that won’t set you back. Plus, tools like these are useful whether you’re hoping to buy a residential property or investment property.
When you compare interest rates, make sure you’re also considering elements like any potential credit provider fees and loan features like access to an offset account, as well as the lender’s overall customer service.
Securing a low-interest rate might be a priority, but if you find a lender with a competitive home loan interest rate but negative reviews about their high fees or poor customer service, that can be a red flag.
Ultimately, remember that interest rates can change frequently. It’s integral to stay on top of things when you’re in the process of locking down a home loan. So, conduct research, ask lots of questions, and continue comparing interest rates.
This can empower you to remain an informed consumer and will help you find the best option for both you and your finances.
And if you’re ever feeling stuck about comparison rates, contact a professional from The Mortgage Agency for hands-on support and guidance.
