- Posted 01 Feb
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So you’ve decided to refinance your home loan. You’ve started shopping around and you’ve noticed that a lot of lenders show an interest rate and a comparison rate.
What is a comparison rate and do you actually need to worry about it? Isn’t the advertised interest rate what really matters?
That’s what we’re going to answer for you today!
What is a Comparison Rate?
It’s important that you understand what the comparison rate is when researching your options for a home loan, particularly when you’re looking to refinance.
A comparison rate shows the true cost of a interest charged on your home loan. In Australia, lenders must advertise their comparison rate alongside the interest rates because the law requires them to do so.
The comparison rate is the interest rate plus the majority of the fees and charges associated with the home loan, combined into one figure to make it easier for you to see what the true cost to you will be.
How Does a Comparison Rate Affect Your Home Loan Decision?
It’s important that you’re aware of comparison rates, because a lot of lenders will advertise their best interest rate to grab your attention.
What you need to do is always look for the comparison rate, which is often displayed in very small print with the interest rate, as this provides you with a truer picture of what the interest rate will actually be should you choose to refinance with that lender.
Often, there won’t be a huge difference between the advertised interest rate and the comparison rate, but it does pay to make sure you’re fully informed when shopping around — you don’t want to be caught out with an interest rate that is significantly higher than what you’d originally thought.
Why Using a Mortgage Broker is to Your Advantage
Once you understand how comparison rate’s work, it can make it a little trickier to make a decision on what to do regarding which lender to choose.
An accredited mortgage broker like Australian Credit and Finance will be able to provide you with more details about comparison rates as well as helping you with other home loan requirements that you need to be aware of, such as loan features and functions.
It’s important that you don’t just focus on the advertised interest rates and comparison rates. You need to also think about how much you’re borrowing, what loan term you’re looking at and what features you need in your home loan.
If you don’t take these into account, you might find your loan costing you more than you’re currently paying.
Use our free mortgage calculators to determine what your specific costs will be, based on the information you provide, and then chat with us to ensure that you’re getting the right mortgage that meets your specific needs.
If you’re ready to refinance your home loan, give our team a call today to discuss all of your options, including the best interest and comparison rates for your needs.