How do I find a top home loan?

If you’re looking for a top home loan, there are a few things you need to compare to make sure you find the best deal.

Home loans have different features, rates, fees and eligibility criteria that can all have an impact on the total cost of your loan. 

What to look for when comparing top home loans:

Certain aspects of a home loan product can make a substantial difference to the total cost of buying a home.

When comparing home loan, make sure to check the following before you apply:

  • Interest rates: Finding the lowest rate is usually the best place to start, but you need to check the advertised rate, the comparison rate and whether the loan is fixed or variable
  • Loan to value ratio (LVR): How much do you need to borrow? Do you have a 20 per cent deposit? Your LVR will determine if you have to pay Lenders Mortgage Insurance (LMI)
  • Loan term: Shorter loan terms can mean you have higher repayments but lower total interest, whereas longer loan terms can have higher total interest but lower repayments
  • Extra features: Do you need an offset account, redraw facilities or the ability to make extra repayments at no cost? It pays to check the features offered by each lender.
  • Fees and charges: Are there ongoing fees, admin fees, legal fees or establishment fees? Check all charges before you calculate the total cost to find the best home loan

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Advertised Rate

2.55%

Fixed - 1 year

Comparison Rate*

3.21%

Company
Adelaide Bank
Repayment

$638

monthly

Features
Redraw facility
Offset Account
Borrow up to 79.9999%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

2.48

/ 5
Go to site
More details
Advertised Rate

2.84%

Variable

Comparison Rate*

2.46%

Company
Athena Home Loans
Repayment

$710

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.96

/ 5
Go to site
More details
Advertised Rate

3.39%

Variable

Comparison Rate*

3.59%

Company
Pepper
Repayment

$1,484

monthly

Features
Redraw facility
Offset Account
Borrow up to 85%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

2.03

/ 5
Go to site
More details
Advertised Rate

2.55%

Variable

Comparison Rate*

2.60%

Company
CUA
Repayment

$1,353

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.10

/ 5
Go to site
More details
Advertised Rate

2.94%

Variable

Comparison Rate*

3.34%

Company
Newcastle Permanent
Repayment

$1,413

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

2.57

/ 5
Go to site
More details
Advertised Rate

2.84%

Variable

Comparison Rate*

2.68%

Company
Athena Home Loans
Repayment

$710

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.96

/ 5
Go to site
More details
Advertised Rate

3.29%

Variable

Comparison Rate*

3.71%

Company
NAB
Repayment

$823

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.46

/ 5
Go to site
More details
Product
Advertised Rate

2.79%

Fixed - 3 years

Comparison Rate*

4.46%

Company
CUA
Repayment

$698

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.71

/ 5
Go to site
More details

Learn more about home loans

How do I find the best interest rate?

Generally, when you’re looking for a home loan many will first look for a low interest rate. 

When rates differ by only a few percent, it might not seem like a lot, but just 1 per cent difference in interest can equate to hundreds of thousands of dollars over the length of your loan.

A small change in your interest rate can make a big difference to the total cost of your home loan:

 Interest rate Monthly repayment  Total interest  Interest saved 
4.34%  $3,828  $448,259   
3.34%  $3,445  $333,376  1% saves $114,883 
3.24%  $3,408  $322,255  0.10% saves $11,121 
3.03%  $3,330 $299,124  0.21% saves $23,131

Calculations based on a $700,000 home loan with a loan term of 25 years.

When you’re looking to find the best home loan rate, you need to first consider whether you will choose a fixed or variable rate.

Fixed rate home loans

If you take out a fixed rate home loan, your lender will charge you the same interest rate for the agreed fixed rate term. Fixed rate terms can range from one to ten years and whilst they have benefits, they also have disadvantages.

Pros:

  • Easy budgeting: Your repayments will remain the same for the fixed rate term
  • No risk of a rate increase: If your lender increases their rates, yours will stay the same

Cons:

  • No rate reductions: If your lender reduces their rates, yours will stay the same
  • Additional fees: Redraw fees, early repayment fees and break fees may apply

Variable rate home loans

If you take out a variable rate home loan, your lender can change your interest rate at any time, at their discretion. The changes are usually as a result of a change in monetary policy and the Reserve Bank of Australia (RBA) cash rate.

Pros:

  • Rate reductions: If your lender reduces their rates, you could save thousands
  • More flexibility: Variable rate loans can often have more features available like offset accounts, redraw facilities, and no fees for early repayments.

Cons:

  • Difficult to budget: repayments can change at any time, so it’s harder to plan ahead
  • Mortgage stress: You may find yourself in mortgage stress if you do not put money aside each month in case of a rate increase.

Which is better, a fixed or variable rate?

As with all financial products, the best product for you will depend on your financial situation, spending and saving habits. 

Do you have trouble saving?

If so, a fixed rate may be better for your situation. This is because you will not be surprised by an increase in your interest rate. You will also be able to budget your repayments in advance, knowing your rate will not change.

Are you a disciplined spender?

If you are a disciplined spender who is able to save confidently, and is never out of pocket when it comes to surprise expenses, a variable rate may be the best option for you.

Advertised Rates vs Comparison Rates

After choosing between a fixed or variable rate home loan, you can begin to compare interest rates to see which loan is best.

When you visit a lender website, or a financial comparison site, you will see two rates next to each home loan product:

Advertised Rate

You will be charged the advertised interest rate on your home loan by your lender, as long as you pass certain eligibility criteria. 

If you have a bad credit rating, existing debts or a very low deposit, some lenders will not offer their advertised rate.

Many lenders will reject applicants if they have multiple debts or a very bad credit rating, but in some cases they will increase your interest rate to account for the added financial risk.

Comparison Rate

The comparison rate was introduced in Australia to help consumers better understand the cost of their mortgage. 

Part 10 of the National Credit Code (NCC) legally requires all Authorised Deposit Taking Institutions (ADIs) to provide a comparison rate next to their advertised rate.

This was implemented to give consumers a better idea of the total cost of their loan, as the comparison rate includes the interest rate and most fees and charges. 

When you find a home loan that has a comparison rate very close to the advertised rate, this is often a good sign there are minimal fees attached to the loan.

Insider tip:

Comparison rate does not include all fees and charges, so you may be better to calculate the total cost of a loan by using a mortgage calculator to work out the principal and interest, then add on all fees and charges. 

What is the best LVR to avoid LMI?

The Loan to Value Ratio (LVR) is the percentage of the property value that a lender is willing to lend you. 

Typically, home loans have an LVR between 70 and 95 per cent of the purchase price, with lower interest rates for borrowers with higher deposit amounts.

If you do not have a deposit of at least 20 per cent, you will be charged Lenders Mortgage Insurance (LMI).

How much can LMI cost you?

So, if you’re looking to get a home loan, and want to avoid LMI, which can be in the tens of thousands, make sure you save at least a deposit that is at least 20 per cent of the property purchase price.

Say for instance, you want to purchase a $700,000 property and you only have a $40,000 deposit, your LVR would be 94.29%, and your LMI would be somewhere between $29,000 and $35,000, excluding stamp duty. 

It is difficult to estimate an individuals LMI as your individual financial situation will impact the total number. However, using an LMI calculator will give you a rough estimate.

Which bank has the lowest home loan fees?

When you’re looking for a top home loan, you will want to look for a low interest rate and low fees. 

Each bank will have different fees associated with each home loan product, and they can charge these fees at their own discretion. 

Some banks will have establishment fees that differ by hundreds of dollars, and some banks will have slightly higher than average interest rates and no expensive fees.

This is why it’s best to check with your mortgage broker or directly with the lender to find out exactly what fees apply, and how much they will cost you. 

What fees are charged when you take out a home loan?

Generally, banks will charge the following fees when setting up a home loan.

  • Establishment fees
  • Legal fees
  • Conveyancing fees
  • Stamp Duty
  • Ongoing fees, can be monthly or annually
  • Early repayment fees
  • Redraw fees
  • Late payment fees

Finding this information out before you complete your application will allow you to compare the total cost of each home loan to make sure you find the top one.

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 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.

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.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

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.

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.

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. 

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.

The fine print – what are the eligibility criteria?

This competition is only available to Australian residents who are over 18 and check their home loan interest rate at RateCity. However, you are not required to refinance your home loan or apply for any financial products.

You can still enter if you don’t have a home loan yet – enter how much you plan to borrow and the details of the property you’re considering, and we’ll compare mortgage offers that may suit your needs and estimate how much you could save compared to a loan with an average interest rate. 

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 the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

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 however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

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 the average annual percentage rate?

Also known as the comparison rate, or sometimes the ‘true rate’ of a loan, the average annual percentage rate (AAPR) is used to indicate the overall cost of a loan after considering all the fees, charges and other factors, such as introductory offers and honeymoon rates.

The AAPR is calculated based on a standardised loan amount and loan term, and doesn’t include any extra non-standard charges.

What is an ongoing fee?

Ongoing fees are any regular payments charged by your lender in addition to the interest they apply including annual fees, monthly account keeping fees and offset fees. The average annual fee is close to $200 however there are almost 2,000 home loan products that don’t charge an annual fee at all. There’s plenty of extra costs when you’re buying a home, such as conveyancing, stamp duty, moving costs, so the more fees you can avoid on your home loan, the better. While $200 might not seem like much in the grand scheme of things, it adds up to $6,000 over the life of a 30 year loan – money which would be much better off either reinvested into your home loan or in your back pocket for the next rainy day.

Example: Anna is tossing up between two different mortgage products. Both have the same variable interest rate, but one has a monthly account keeping fee of $20. By picking the loan with no fees, and investing an extra $20 a month into her loan, Josie will end up shaving 6 months off her 30 year loan and saving over $9,000* in interest repayments.

Remuneration disclaimer

How do I find out my current interest rate and how much is owing on my loan?

Your bank statements and/or your internet banking should show these details. If you are not sure, call your bank or estimate.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

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.

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

How much can I borrow with a guaranteed home loan?

Some lenders will allow you to borrow 100 per cent of the value of the property with a guaranteed home loan. For that to happen, the lender would have to feel confident in your ability to pay off the mortgage and in the security provided by your guarantor.