There’s no one-size-fits-all option when it comes to home loans. Choosing the best mortgage will depend on how you’re planning on using the home and what you want out of the loan. But doing your research on what makes up the best home loan for you can help you come out on top.

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3.27%

Variable

3.28%

HSBC

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

4.00

/ 5
More details

3.09%

Variable

3.09%

UBank

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.27

/ 5
More details

2.99%

Fixed - 3 years

3.45%

UBank

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.42

/ 5
More details

3.59%

Variable

3.24%

Athena Home Loans

$898

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.10

/ 5
More details

3.49%

Variable

3.49%

UBank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.65

/ 5
More details

3.59%

Variable

3.49%

Athena Home Loans

$898

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.10

/ 5
More details

3.49%

Variable

3.45%

Athena Home Loans

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.53

/ 5
More details

3.19%

Fixed - 5 years

3.44%

UBank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.51

/ 5
More details

3.49%

Fixed - 5 years

3.85%

UBank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.05

/ 5
More details

2.97%

Variable

2.99%

Well Home Loans

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.54

/ 5
More details

2.88%

Variable

2.90%

loans.com.au

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.35

/ 5
More details

3.39%

Variable

3.39%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.95

/ 5
More details

3.19%

Variable

3.22%

Mortgage House

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

4.31

/ 5
More details

3.38%

Variable

3.52%

Virgin Money

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.00

/ 5
More details

3.32%

Variable

3.37%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.88

/ 5
More details

3.15%

Variable

3.17%

State Custodians

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.45

/ 5
More details

3.36%

Variable

3.39%

IMB Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

3.87

/ 5
More details

3.19%

Fixed - 3 years

3.74%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.96

/ 5
More details

3.79%

Variable

3.79%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 85%
Extra Repayments
Interest Only
Owner Occupied

3.27

/ 5
More details

3.49%

Fixed - 1 year

3.81%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.72

/ 5
More details

Learn more about home loans

How do I choose the best mortgage?

Choosing the best mortgage is all about knowing what kind of borrower you are and what you can afford.

The best place to start is by asking the following questions:

  1. Will I live in the home, or use it as an investment?
  2. What mortgage repayments can I afford? 
  3. How long will I need to take out a home loan for?
  4. Do I want any features, like the ability to make extra repayments?
  5. How can I avoid paying pesky fees?

This will determine the type of borrower you are, and what you’ll want to look for in a mortgage. Then you’ll want to lock down the details, such as:

Fixed or variable interest rate?

Before you start looking for the lowest mortgage interest rates, decide whether you're interested in a variable or fixed interest rate.

Variable rates If rates rise, so will your mortgage repayments, but if your bank passes on a rate cut, you could find yourself paying less interest on your home loan.
Fixed rates Lock in a fixed rate for a period of time, keeping your repayments consistent for easy budgeting. If rates drop, you’ll miss out on some savings, but you'd also be protected from higher repayments if rates rise.

How large is your home loan deposit?

Many of the lowest rates on the market are available only to borrowers who can afford a large deposit (often 20%+ of the property value). This is because the higher the security deposit, the less of a risk a borrower represents to a lender.

Some loans can be applied for with a smaller deposit, such as 10% or even 5% of the property value. Though these loans will likely require you to pay a higher interest rate, and as well as Lender's Mortgage Insurance (LMI).

Are you an owner-occupier or an investor?

The interest rate on your home loan also depends on whether you're planning to live in the property you buy as an owner-occupier, or rent it out as an investor. Lenders generally charge higher interest rates for investors home loans, due to the higher risk of payment defaults involved, as well as government regulations. 

All of these factors will determine what kind of mortgage you qualify for. If you’re still unsure where to start, please check out our home loan guide

What is the best mortgage rate in Australia?

Everyone loves a good deal. But finding the best home loan rate in Australia isn’t just about choosing the lowest on the market. 

Mortgage rates vary based on loan type and deposit size, and aren’t always available to all types of borrowers. Also, if you’re looking for a loan with a range of features, this may cost you more than a no-frills option. 

The lowest rate may not be the lowest rate for very long. Lenders can offer customers ‘honeymoon rates’. These are lower rates that revert back to higher ongoing ones after a period of time. 

Further, the lenders offering more competitive rates may be online-based only. If you’re the type of person who relies on going into branches to do your banking, an online lender may not suit. 

The easiest way to find your best mortgage rate is to use comparison tools, such as tables and calculators. Calculators can help you gauge what repayment amount and interest rate you can afford. Comparison tables allow you to filter down and compare a range of loans. You can look at the features and potential fees to narrow down a list of loan options. 

How can comparison rates help me get the best mortgage?

Relying on just the advertised rate could see you paying more than expected in your loan repayments. That’s why it’s recommended to look at the comparison mortgage rate, not just the advertised rate. 

A comparison rate calculates the upfront and ongoing fees that go into the total cost of your repayments. This makes comparison rates a more accurate reading of what a home loan will cost. If the best mortgage for you means a low rate and fees, comparing comparison rates can help you come out on top.   

What makes up the best mortgage?

The best mortgage, in theory, may be one that costs the least, pays down the interest, and does so in a timely manner.

So, here’s what you need to know and how you could try and achieve this:

1. Don’t just look at the interest rate

As mentioned above, there’s more to home loan costs than the advertised rate. Home loan fees and costs can leave borrowers paying more than anticipated. 

There are many different types of home loan fees to be aware of. These can include:

  1. Establishment fees
  2. Settlement fees
  3. Annual fees
  4. Administration fees
  5. Fees for using features like an offset account or redraw facility
  6. Fees associated with making extra repayments

It's essential to research your loan options and enquire about what fees will be charged. There are a range of lenders who scrap some fees altogether. Don't feel obliged to pay thousands in unnecessary costs because you haven’t done your research.

Further, if you’re refinancing you can also often negotiate with a lender to waive some of the upfront costs. If a lender wants your business, they may be willing to offer a discount to keep you happy.

2. Pay down your principal

Interest-only loans can be an appealing way to reduce your mortgage repayments. If you’re only paying the interest, your repayments will be much cheaper than if you were paying off the principal too. Interest only-loans can also help with tax deductions on an investment property. 

Interest-only terms tend to last a set period of time, not the life of the loan. However, you won’t be chipping away at your principal and you’ll be reducing your loan term, making it more expensive once the interest-only period ends. 

For example, if you had a $300,000 home loan at 3.5 per cent, with a loan term of 30 years that was interest-only for the first 5, this would cost $875 a month. However, once that interest-only period ended, the monthly repayments would jump to $1,502 a month. This will cost you $18,093 more over the life of the loan too. 

Cost breakdown:

Loan type  Monthly repayments: interest-only period Monthly repayments: principal and interest period Total cost

Interest-only 

$875 (first 5 years) $1,502 (25 years) $503,061
Principal and interest   - $1,347 (30 years) $484,968

Note: based on $300,000 loan at 3.5%. Does not factor in fees or fluctuating interest rates. 

3. Reduce your interest

Interest repayments aren’t the only thing to factor in when considering loan costs - but they do play a big part. There are a few ways you can keep interest down. 

Additional repayments: Paying more than is required each month is another way to reduce your loan’s principal and future interest charges. See if your desired loan options allow for extra repayments - without incurring fees of course. Keep in mind, this method will only work if your household budget will allow for larger repayments. If you’d be putting yourself into mortgage stress by doing so, consider alternatives. 

Shorter loan terms: If you can opt for a shorter loan term - say, 25 years instead of 30 - you’ll also reduce the amount of interest you pay overall. You will pay more each month though as you’ll be chipping away at your principal, so use a mortgage calculator to ensure your budget can work with this. This could be harder short term, but may have serious long-term benefits. 

Refinance to a lower rate: If what you thought was the ‘best mortgage’ ends up being less competitive after a few years, consider refinancing to a lower rate lender. Refinancing does come with its own costs, including your time and money. However, the switching costs may pay for themselves if you’re now saving enough in monthly repayments. Read more about refinancing in our refinancing guide.

Can my credit score affect my mortgage?

Yes, your credit score will impact the mortgage you can get. When it comes to lending money, banks are all about measuring risk. Lenders use your credit history and score as a measure of your financial status and how reliable you could be as a borrower. This helps to determine whether to lend you money. 

Lenders favour more ‘trustworthy’ borrowers as they don’t want you to default on your loan. So, they are more likely to approve loans to those with good credit history. Borrowers with excellent credit are also often rewarded with more competitive interest rates. 

If you know your credit score could be improved, there are a few things you can do:

  1. Request a copy of your credit history and check for mistakes
  2. Pay off your existing debts or make consistent repayments
  3. Cancel your credit cards (if you don’t trust your self control)

You may find that your credit score has improved thanks to Comprehensive Credit Reporting. This will mean that positive information will be shown in your credit history. According to ASIC’s MoneySmart, this will include:

  • the type of credit products you have held in the last 2 years
  • your usual repayment amount
  • how often you make your repayments and if you make them by the due date.

For more information on credit scores, please check out RateCity's credit score guide.

Frequently asked questions

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is the best interest rate for a mortgage?

The fastest way to find out what the lowest interest rates on the market are is to use a comparison website.

While a low interest rate is highly preferable, it is not the only factor that will determine whether a particular loan is right for you.

Loans with low interest rates can often include hidden catches, such as high fees or a period of low rates which jumps up after the introductory period has ended.

To work out the best value for money, have a look at a loan’s comparison rate and read the fine print to get across all the fees and charges that you could be theoretically charged over the life of the loan.

What is an interest-only loan? (include how do I work out interest-only loan repayments)

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

How do I calculate monthly mortgage repayments?

Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.

Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including:

  • the amount owing on your mortgage
  • the value of your property
  • your current interest rate
  • name of existing lender
  • property address

We’ll compare this information to the home loan options in the RateCity database, and show you which home loan products you may be eligible to apply for.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Does the Rate Guarantee apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Rate Guarantee.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

What is principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

Are bad credit home loans dangerous?

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

What is a guarantor?

A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.

Often, guarantors are parents in a solid financial position, while the principal borrower is a child in a weaker financial position who is struggling to enter the property market.

Lenders usually regard borrowers as less risky when they have a guarantor – and therefore may charge lower interest rates or even approve mortgages they would have otherwise rejected.

However, if the borrower falls behind on their repayments, the lender might chase the guarantor for payment. In some circumstances, the lender might even seize and sell the guarantor’s property to recoup their money.

Why do people use no credit check loans?

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.