Getting the lowest home loan rates

Find out how to get the home loan with the lowest interest rates in Australia 

Buying a house is one of the most exciting things that most people will ever do but it can be stressful because it usually also involves taking on long-term debt. A home loan is a huge responsibility and many home buyers look for ways to reduce their repayments.

One way a homeowner can save on their repayments is by securing a low interest rate on their home loan. The interest rate is a very important factor in determining the total cost of a home loan. For instance, if your interest rate is 6.50%, and your loan amount is $400,000—you will pay $510,178 in interest if the loan lasts for 30 years! But with a lower interest rate of 3.72%, you’ll only pay $264,437 in interest.

If you wish to get the lowest home loan rate possible, here are some tips and tricks:

Examine your credit score

A good credit score can lay the foundation for a low rate on your home loan. Your lender will most likely examine your creditworthiness through your credit report. With a high score, you may be able to negotiate with your lender to get a better rate, or get discounts on some associated fees. While a bad score could result in a higher mortgage rate, or your loan application may even get rejected.

If you have a low credit score, you can still improve this by making your loan repayments on time, avoiding getting new debt, and keeping your debt balances as low as possible.

Compare interest rates

When comparing interest rates among various lenders, you should pay more attention to the comparison rate than the advertised rate. The Australian Government developed the concept of a comparison rate so home buyers could see the real cost of their loan. The comparison rate includes the interest rate, fees and charges on the loan all displayed as a single percentage rate.

The formula to calculate a comparison rate is based on a loan of $150,000 with a loan term of 25 years. If the loan size is more than $150,000, or if the loan term is 30 years—the figure will be different. Overall, using the comparison rate will give you a more accurate guide when comparing various loans than using the headline interest rate.  

Use a home loan calculator

Another tool you can use when comparing loans is a home loan calculator. This allows you to quickly evaluate how much interest you will pay on a loan of a given size and also what your repayments will be. Some home loan calculators allow you to compare two loans, so you can easily see which is cheapest.

Consider refinancing

Refinancing is when you switch to a different mortgage, either with your current lender or a new lender. There are many reasons why a homeowner would want to refinance. It may be because of a change in their financial situation like a loss of job, they may want to free up some cash for a home renovation or they may want to pay for their child’s education. The most common reason why people refinance their home loan is to secure a lower interest rate.  

Even if your current lender no longer offers a competitive interest rate, you should consider all of the fees and charges associated with switching before making any decision. These fees can be levied by your former lender and your new lender.

Change loan types

If refinancing is too costly because of the exit fees and upfront costs involved, changing your loan type may be another option. If you’re on a variable rate, you can switch to a fixed rate loan where your interest rate is ‘locked-in’ for an agreed period of time, usually between one and five years.

This benefits the homeowner because they know exactly how much their repayments will be, so it’s easier to budget. Plus, if the interest rate goes up, the homeowner is protected. On the downside, if the rate goes down, they will not be able to benefit.

Put your money down or shorten your term

Saving a bigger deposit will reduce the amount you need to pay in interest. If you can save more than 20% of the value of the property this will not only reduce your interest but you can also avoid paying for Lender’s Mortgage Insurance.

Apart from saving a big deposit, cutting the life of your loan can also reduce the total interest you pay on your home loan. For example, a $400,000 loan with a 30-year term and an interest rate of 3.64% will incurr interest totalling $257,930. While the same loan amount with the same interest rate and a 20-year term will incurr total interest of $163,692. The repayments per month may be higher with a shorter term but you will save on total interest.

Essentials home loans - A streamlined low-rate, low-fee home loan product

  • Unlimited free redraws with no minimum redraw amount
  • Interest only option available
  • No monthly or ongoing fees

APPLY NOWFIND OUT MORE

Rates from

  • 3.64% variable rate p.a*
  • 3.66% comparison rate p.a*

 
Call us on
13 10 90
or
Request A Call
7am - 7pm, Monday to Friday. AEST