Compare Home Loans
Find a home loan suited to your requirement
What is a home loan?
A home loan refers to the amount of money you can borrow from a Lender, generally a bank or mortgage broker, to purchase a property. When your home loan is approved, you sign a legal document, called a mortgage, wherein you agree to pay back the home loan in installments. However, the phrase' home loan’ and 'mortgage’ often get used interchangeably.
The importance of a home loan comparison
Different life stages require a different approach to mortgage repayments. A home loan comparison will help you determine which home loan type you can afford and the features that are best suited to your unique requirements. Compare various Lenders interest rates, as well as upfront and ongoing fees and charges.
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Home loans for different stages of life
When choosing a home loan, consider the stage of life you're in now, and how you intend to use the property you want to purchase:
First-time home buyer: Typically, a person in their 20's or 30's, wanting a home loan so they can purchase their first house.
Buying your next home: People that already own a home but are looking to take out another mortgage so they can buy a new house or renovate their existing home. For example, a couple starting or growing their family.
Investment properties: Looking for the best home loan rates so they can purchase property to rent it out and earn an income.
Refinancing: People with an existing mortgage that want to switch home loans. Generally, people change home loan providers because of cheaper rates, or they want a Lender that will help them consolidate all their investments and/or debt in one place.
Construction: For those wanting to build their house from scratch and require a loan that enables them to make payments throughout the different stages of development.
Types of home loans available in Australia
The two most significant parts to your home loan repayment are the principal (the amount of money you borrow from the Lender) and the interest charged for borrowing this amount.
There are generally two ways you can make mortgage repayments:
1. Interest only loan
You only pay the interest owed on your home loan for a specific period, usually between 1 and 5 years, and do not pay off the principal amount. Meaning, you do not build any property equity during this period. After the fixed term, most interest-only loans revert to principal + interest home loans.
This might be an option to consider if you can’t initially maker higher repayments. However, you might end up paying more interest over the life of your loan.
2. Principal + interest
For a specified period, you pay some of the principal amount plus the interest every month. Each time you pay the minimum repayment, you're reducing the principal loan amount while also covering the interest.
While you’ll be making larger mortgage repayments, compared to interest-only loans, at the end of the loan term, you will own the property. By paying some of the amount you initially borrowed (the principal), you’re growing your equity in the property - the difference between the value of your home and the amount you owe on it.
Different home loan interest rates
Home loan interest rates are largely dependent on whether you're buying a house with the purpose to live in (Owner Occupied) or plan to rent/lease or sell the property (Investment). Investment loans are usually more expensive because they are typically viewed as a higher risk to Lenders compared to Owner Occupied home loans.
Once you're clear on the purpose of your home loan, you then need to choose between a variable or fixed home loan rate.
Variable rate home loans
Interest rates rise and fall as Lenders respond to changes to the market interest rates, meaning your repayments will fluctuate. While variable rates offer less certainty than fixed rates, you could potentially pay less interest and can usually make additional payments to you can pay off your loan quicker.
Fixed rate home loans
Your interest rate is set for a certain period (generally up to 5 years), thus locking it in and protecting you against future interest rate rises. However, you usually cannot make additional payments and will not benefit from falling interest rates. There might also be significant fees payable should you terminate the fixed period early.
Because interest rates and fees vary between Lenders, be sure also to review the comparison rate when comparing different home loans from various providers. The comparison rate includes your interest rate, plus the upfront and ongoing fees charged by a Lender. The comparison rate gives you an idea as to which provider's overall rates might suit you best.
The home loan process explained
Once you’ve found your ideal home or investment property and chosen a Lender with competitive rates, you’re ready for the next step in the home-buying process:
- Apply for pre-approval: To be pre-approved for a loan means the Lender has investigated your suitability as a home loan candidate and determined what you can afford. However, pre-approval only indicates whether you're likely to get the loan, it does not mean your home loan is guaranteed. Once you've received conditional pre-approval, you can make an offer on the property you want to buy.
- Property valuation: Once you’ve found a property, a valuer will need to inspect the property to appraise it.
- Determine the deposit required: The deposit amount a Lender requires you to pay up-front will vary. However, the more money you save, the less you’ll need to borrow, thus the lower the interest you’ll pay over the life of your home loan.
- Loan Mortgage Insurance (LMI): Generally, if your deposit is less than 20% of the property value, you'll have to pay a Lenders' Mortgage Insurance. LMI protects the Lender should you be unable to repay your loan. The LMI will differ from Lender to Lender and is usually based on your home loan amount and the deposit paid. This type of insurance can generally be paid upfront or as part of your loan amount.
Frequently asked questions and answers
Whether you qualify for a home loan depends on a variety of factors, including the Lender you chose, your employment, income and expenses, your deposit and the loan amount you're borrowing. The type of property you're buying, and its purpose (Owner Occupied or Investment) will also affect your eligibility.
The deposit you need to apply for a home loan will vary depending on the bank or mortgage broker's lending criteria. For example, your employment history, savings and debt, and the value of the property you want to purchase.
Take note: If your deposit is less than 20% of the value of your property, as assed by the Lender, you’ll generally need to pay a Lenders Mortgage Insurance (LMI). Whether you need to pay this mortgage insurance is usually dependent on the Loan to Value Ratio (LVR), which is essentially the amount you’re borrowing represented as a percentage.
The bank or mortgage broker usually calculates your repayments using:
- The original amount you borrowed (principal amount),
- Your monthly interest rate,
- How long you'll be repaying your loan, and
- Whether you make payments weekly, fortnightly or monthly.
This formula becomes quite tricky. You might want to try one of the many mortgage repayment calculators available on the web.
- Offset accounts: The interest you pay is reduced when your savings are offset against your home loan.
- Extra repayments: Making extra mortgage repayments will allow you to reduce the interest you pay. Be sure to check if there’s a cap on additional repayments.
- Redraw Facility: A redraw facility is a home loan feature that allows you to access the additional payments you’ve made to your loan. There might be a minimum amount you’re allowed to redraw and/or a limit on the frequency.
- Line of credit: With this feature, you have a single account for your home loan and your everyday spending, where the Lender gives you access to a pre-determined amount of credit, like an overdraft account.
- Packages with discounted rates: Special discounts might be available when you package multiple products (including a home loan) under one bank. For example, waived application fee and interest rate discounts.
- First Home Owner Grant (FHOG): A once-off grant might be payable if you satisfy all the eligibility criteria.
- Split rate option: Select financial institutions will allow you to split your home loan, so one part is at a variable rate and the remainder is at a fixed rate.
- Loan portability: Should you relocate to a new property; some Lenders will allow you to take your mortgage with you. You save by not having to apply for a new home loan.
- Repayment holiday: Provides you with the opportunity to take a break on your home loan repayments for a short period, usually up to 6 months.
- Home loan top up: This feature generally allows you to borrow more money from your Lender, for example, to pay for home renovations.
- Repayment schedule: Paying fortnightly rather than monthly will typically result in you’re having paid an extra month’s worth of payments every year.
It's essential to consider fees and charges that are linked to your home loan, including:
- Valuation fee: Costs paid to have your property valued by a professional. The report compiled will be required by your Lender.
- Application fee: Also known as establishment fees or settlement fees, is a fee charged by the Lender to cover some of their costs for setting up your home loan.
- Lender’s Mortgage Insurance (LMI): If you borrow more than 80% of the property’s value.
- Government fees: Including stamp duty, mortgage registration and title transfer fees.
- Legal fees: You need to budget for the legal expenses, including paying a conveyancer or solicitor, as it pertains to the transferral of ownership of the real estate.
- Inspection costs: For example, building and pest inspection.
- Title registration: When buying a property to live in, you'll pay a fee to register you as the Owner and the bank as the mortgagor of the property.
- Mortgage registration fee: The cost the state and territory charges to register your physical property as the security on a home loan.
- Rock lock fee: If you have a fixed rate home loan, you’ll pay a fee so you can lock in the rate for a period.
- Fixed rate break fees: You might have to pay a certain amount if you 'break' your fixed rate mortgage. This might happen when interest rates have come down since you took out your fixed home loan.
- Land and water rates, plus you might also have to pay body corporate fees, like garden maintenance.
- House and contents insurance: Protect your property and everything inside it from things like natural disasters and theft.
- Discharge fees: Should you pay your home loan off in full, you might have to pay a discharge fee.
When buying property in Australia, stamp duty tax gets imposed and varies between states and territories. The amount you'll pay is usually based on the property's market value or purchase price, whichever is greater.
First-time home buyers with a home valued up to $600,000 generally receive a discount on stamp duty in many states.