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Comparison rates were introduced to help Australian consumers see the true cost of a home loan quickly and easily. Personalised comparison rates do the same job but go one step better – by making the calculation relevant to your situation.
Plug information like loan amount and loan term into a personalised comparison rate calculator and you will get a rate based on this specific information.
The standard comparison rates commonly advertised by lenders lack this tailored approach. Instead, they are often based on a loan size of $150,000 over 25 years. If your loan size is considerably larger than $150,000 or you have a different loan term, you might not find a standard comparison rate to be of much help.
Why loan size matters
A comparison rate includes the home loan’s interest rate together with fees that may apply. So rather than choosing a home loan because it has a low-interest rate, comparison rates are there to remind consumers that the interest rate is not the only factor that bumps up the cost of a loan.
One issue with looking at a comparison rate based on a small loan size of $150,000 is that it is difficult to provide an accurate reflection of the total interest you would pay on a much larger loan. Considering the average loan size in Australia is $345,600 for first home buyers and $395,800 for owner-occupiers, it makes sense to get a clear picture of the role that the interest rate plays in your total repayment commitments.
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Where to find personalised comparison rates
Personalised comparison rates can also be found in Key Fact Sheets. These are available from lenders for every home loan on the market in Australia.
The Yellow Brick Road comparison rate calculator allows you to personalise comparison rates according to the loan term, loan amount, fixed interest rate and fixed period, ongoing rate and fees.
Comparison rates don’t usually include all home loan related fees, but our calculator provides the ability for you to enter the full range of fees, including upfront, annual, monthly and discharge fees.
Once you’ve keyed in this information, the calculator presents you with a percentage comparison rate. It also shows your ongoing and total repayments, plus a graph that illustrates how long over the timeline of your loan it will take to pay off the interest and principal.
Of course, these calculations are an approximate guide only. Keep in mind that repayments have only a part to play in the actual cost of the loan: the faster you pay it back, the lower the cost.
Personalised comparison rates are also found in Key Fact Sheets. These are available from lenders for every home loan on the market in Australia. They provide a summary of the home loan product, a personalised comparison rate, associated fees and any additional information related directly to the loan.
The complete picture
While a personalised comparison rate is a useful tool for comparing the cost of different loans, it shouldn’t be the only factor to consider. Features and benefits like redraw, offset and flexible repayment periods are all important considerations when deciding if a loan suits your needs.
For a complete picture of how loans compare with each other, speak to your local Yellow Brick Road mortgage broker. Our one-on-one advice can make all the difference when you’re feeling overwhelmed about which loan to choose .