For most of us, the experience of buying a home can be a little confusing at first. There are so many concepts to wrap your head around – comparison rates being one of the most important.
There are a lot of misconceptions out there about the difference between the advertised rate and the comparison rate especially. But distinguishing the two is crucial when looking at your available home loan options.
Ready to learn?
Meet the comparison rate
In Australia, all lenders that advertise a home loan rate are legally required to include a comparison rate.
The comparison rate is a more realistic rate that combines the total loan costs – not just interest. This includes any fees and charges that might come with the loan.
When choosing a home loan that is right for you, the comparison rate is the most important rate to focus on.
So, what is an advertised rate then?
Do one quick Google of home loans and you’ll see advertised rates. These are the ones you’ll see on TV, billboards and social media.
Can you guess why lenders lead with this and not their comparison rate?
Yup, it’s typically a heck of a lot lower because it’s just the base interest rate. Keep in mind that advertised rates can fluctuate depending on whether they’re fixed or variable.
The advertised rate doesn't represent the total fees and charges that apply to your loan, so it’s only a representation of a partial cost.
What is mortgage refinancing?
Mortgage refinancing means you’re using a new mortgage to pay off the old one and getting a better interest rate and/or payment in return.
When was the last time you checked if you could be saving money on your home loan?
It’s best practice to stay up-to-date with the rate you currently pay as well as the rate you are eligible for. Book in a time to speak to your bank or broker and find out if you could be getting a better deal elsewhere.
DISCLAIMER: This article contains general information only, and is not general advice or personal advice. Wisr Services does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.
*The comparison rate is based on a loan amount of $150,000, over a 25 year term. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Terms, conditions, fees and charges apply and your full financial situation would need to be reviewed prior to acceptance of any offer or product. Fees included in the comparison rate include: Application Fee, Settlement Fee, Estimated Solicitor Document Preparation Fee, Estimated Valuation Fees , Discharge Fee, Annual Fee if applicable and Offset Fee if applicable.