Compare Australian Home Loans

There are heaps of home loans on offer these days, designed to cater to a wide variety of borrowers and their needs. That means that if you’re over 18 years old and an Australian citizen or resident, chances are you’ll be able to find a mortgage suitable for you.

The best home loan rates are often reserved for the best quality borrowers, but how does a lender determine whether you're good quality or not? Much of it comes down to what type of borrower you are and how much deposit you have. Owner occupier borrowers looking for a principal and interest loan can generally access the lowest rates. By contrast, investor borrowers and those after an interest only home loan may find they have to pay higher interest rates.

Lenders also look at a number of factors including your credit history, your income, your regular expenses and other financial commitments and how much you’re hoping to borrow when deciding whether you’re a reliable borrower.

Buying a home is exciting, but before you get carried away dreaming about seafront mansions, it’s a good idea to come down to earth and crunch the numbers on just how much you can borrow.

How much a bank will lend you will depend on a number of different factors, and the end figure might be a lot different to what you’re expecting. We’ve made it easy to see what kind of budget you might have, with our home loan borrowing calculator. So take it for a spin before you set your heart on a property.

Saving up a deposit is the first hurdle to buying your home - but how much do you need? As a rule of thumb, you should aim to save at least 20% of the property’s value as your deposit. This gives you a loan-to-value ratio (LVR) of 80%, which is pretty standard for home loans, and often means you can score some of the best interest rates around.

To help borrowers get into the market quicker, there are also home loans available for borrowers with deposits of 5% or 10% of the property’s value. But if you have a smaller deposit like this, remember that you will need to pay Lenders Mortgage Insurance (LMI) on top of your loan, which can add thousands of dollars to your total cost.

There are two different types of home loan repayments: interest-only and principal and interest. Which one you choose will make a difference to your monthly repayments.

Interest-only
An interest-only home loan is just what it sounds like - your monthly repayments will only be paying off the interest you owe, and not chipping away at your principal loan amount. While this means your monthly repayments will be lower, keep in mind you’ll also wind up with the lump loan amount to pay off at the end.

The other thing to remember is that usually, an interest-only term lasts for up to 5 years - after that, your lender may let you roll over into another interest-only term, or you might have to start making principal and interest repayments.

Principal and interest loans
This is what’s called an amortizing loan, which means your bank has done the math so that if you pay the same amount each month of your loan, by the end of the loan term, you’ll have paid off all the interest, along with the initial loan principal.

This means that your monthly repayments will be a bit higher than with an interest-only loan, but the good news is you won’t have a lump sum to pay off at the end.

A home loan is a huge financial commitment, so every dollar you can save makes a difference! Apart from finding an offer with a killer interest rate, there are a few money-saving home loan features that you can look for when choosing a mortgage.

• Free extra repayments. One of the most common features included with home loans is the chance to make free extra repayments. By using any spare cash you have to pay a bit more off your loan, you’re lowering your loan amount quicker, and therefore saving on interest. Check out our extra repayments calculator to see how much of a difference it will make.
• Redraw facility. While having access to a redraw facility won’t necessarily save you money, it is handy to have. If you’ve been making extra repayments and find you need that money back for an unexpected bill, you can get it through the redraw facility.
• Offset account. An offset account is a great, low effort way to save on interest. It works more or less like a normal bank account, except that every dollar in your account is offset against your loan amount, so that you pay less interest.
• Split rate option. Another common feature is the option to have half of your loan on a fixed rate, and the other half on a variable rate. This means you can get the best of both worlds - the certainty of fixed rate repayments, combined with the flexibility (and often lower interest rate) of a variable loan.

One last thing to remember - variable rate loans usually come with more features and flexibility than fixed rate options, which might not include any of these features.

There are a number of fees that may apply to your home loan and which you’ll need to budget for. These include:

• Application fee. This is an upfront fee that you pay in order to first apply for a home loan.
• Service fee. This might be charged monthly or annually, and covers the cost maintaining your loan. Generally, the more bells and whistles included in your loan, the more likely it is to include a service fee.
• Legal, valuation and settlement fees. Other fees you may pay upfront, these cover the cost of legal paperwork, as well as the cost for someone to value your property and be present at the settlement of your loan.
• Discharge fee. You might wind up paying a discharge fee when you pay your loan off in full.
• Feature fees. You may also pay a fee for certain features included in your home loan, such as extra repayments, a redraw facility or an offset account. Not all home loans charge fees for these, so make sure you’re not paying a fee when you don’t have to.

The comparison rate is shown next to the interest rate in our table and is designed to help you get an accurate idea of the ‘true’ cost of a home loan. It takes into account both interest and guaranteed fees that apply to a loan.

There are a lot of different home loans options out there, but when you compare based on the comparison rate, you know you’re looking at different options on equal footing.

One thing to remember is that the comparison rate can’t reflect things like offset accounts or other features that might save you money, so while it’s an important part of home loan comparison, it’s not the only thing you need to consider.

You should also keep in mind that the comparison rates shown in Mozo’s tables are based on a specific example of a secured loan of $150,000 with monthly principal and interest repayments over 25 years, just to help you compare your options. You’ll likely have a different loan amount or loan term, so your personal comparison rate may be considerably different to what’s shown here.

The amount of stamp duty that you'll need to pay depends on a number of factors. Each Australian state and territory has different stamp duty rates and concessions so to help you to find out how much you'll need to pay, we've developed a range of Stamp Duty Calulators to help you crunch the numbers:

• New South Wales
• Victoria
• Queensland
• South Australia
• Western Australia
• Tasmania
• Northern Territory
• ACT
  

LMI is an insurance that the borrower pays if they do not have at least 20% equity or a 20% deposit, to insure the bank or lender in case of a loan default. Lenders Mortgage Insurance is different to mortgage protection insurance, as this covers the borrower if they are unable to meet repayments. 

Here’s some of the most common jargon you’ll need to get across when shopping around for a home loan , check out our full guide home loan terms. 

• Comparison rate: this helps you to compare the true cost of loan. It combines the interest rate with fees. 
• Loan to value ratio (LVR): The percentage of money you borrow  compared to the value of the property. 
• Offset account: a transaction account linked to your home loan which enables you to offset the balance in this account against the interest you’re charged on your mortgage.  
• Redraw: If you’re ahead on your mortgage repayments some home loans will allow you to make a redraw if you need access to cash.
  

Right here at Mozo! We’ve got heaps of resources set up to help you work out which home loan is best for you, no matter which stage of the journey you’re at.

If you want some more background on the nitty gritty of borrowing, head over to our home loans guides section where we’ve covered everything from a step-by-step look at buying your first home to how to work out what monthly repayments you can afford.

Or, if you’re trying to sort your budget out, take our home loan calculators for a whirl. You’ll be able to work out what your monthly repayments might be, how much you should budget for stamp duty and how a rate rise will affect your bottom line, no head scratching maths required!

For refinancers, make sure you check out our Switch and Save calculator to see just how much you could put back in your pocket by snagging a better deal.

And if you’re ready to dive right in, then our home loan comparison table above is the perfect place to start your home loan search.