Blog How to get the lowest home loan rate?

How to get the lowest home loan rate?

23 September 2017

Before you go house hunting, it pays to look for the lowest rate. lowest home loan rate. A low rate can save you thousands of dollars over the life of your loan, plus it can reduce your monthly repayments.

Here are some tips to get the lowest home loan rate:

Tip #1 Increase your deposit

Putting down a large deposit up front can be difficult to accomplish but if you can accumulate at least 20% of the value of the property, you will save money in the long term. You won’t be charged for Lender’s Mortgage Insurance, you’ll have more initial equity in the house, and some lenders will offer a lower interest rate.

Tip #2 Strengthen your credit score

Your lender will examine your credit score when you apply for a home loan. A good credit score is helpful for getting a low home loan rate. The higher your score is, the better the terms you can get. A range of online providers will tell you your credit score.  If you have a bad credit score, there are still ways you can improve it, such as avoiding new debts, paying off your loans on time, and not making too many credit enquiries.

Tip #3 Compare mortgage rates

When shopping around for the best home loan, you will need to compare rates to see who offers the most competitive deal in the market. The best way to compare rates is by looking at the comparison rates instead of the headline rates. The comparison rate gives you a more realistic price for your home loan that includes fees.

Typically a loan with a higher comparison rate will have higher fees attached to the product, compared to a home loan with an offered rate and comparison rate that are quite close.

Tip #4 Don’t forget to ask about the fees

A low home loan rate may seem really attractive, but you should also take note of the fees involved. Fees can accumulate and can drive up the overall cost of your loan not accounted for in your initial interest rate, so it is important to check how much the additional costs and upfront fees are including application fees, settlement fees, and closing costs to confirm you are actually getting a good deal.

Tip #5 Use a comparison calculator

This type of calculator is useful when you compare home loan rates, not just from different lenders but also when comparing the different products that one lender offers. A mortgage calculator lets you see what your repayments will be, based upon your loan amount, term, and interest rate. Our mortgage calculator lets you compare two loans so you can easily see the differences.

Tip #6 Consider the nature of home loan you want

The nature of your home loan will also be an important factor determining the cost of your loan. Typically, there are two type of mortgages you can choose from, one is a variable rate loan, and the other is a fixed rate loan.

is a type of mortgage where your interest can change at your lender's discretion. Changes are often based upon changes to the Reserve Bank of Australia's official cash rate or changes in the cost of wholesale funding on international markets. A key benefit of a variable rate loan is that you can make extra repayments and add mortgage features like an redraw offset facility. But the downside is that it exposes the homeowner to the risk of increasing interest rates.

  • A fixed rate home loan

is a type of mortgage where your interest rate stays the same for an agreed period. This protects you when interest rates on other products increase. It means you know how much your repayments will be for up to five years which is great for budgeting. The main downside of a fixed rate loan is that you won't enjoy the benefit if your lender decreases the interest rate. 

Shopping for the best home loan shouldn’t only be about the interest rate. It is also important to factor in the associated costs, fees and customer service. Also, consider the different types and features of the mortgages available so you get the best deal for your situation.   

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