Using a comparison rate to compare loans
It is actually quite difficult to compare home loans as you need to not only take into account the interest rate but also all the fees and charges involved. Fortunately the ‘comparison rate’ makes this task a little easier.
The comparison rate is calculated by adding the interest rate to the main fees and charges on the loan. Note: When using a comparison rate, make sure the loans being compared are for the same amount and term.
In the simple example below, home loan A has a lower interest rate than home loan B, although, due to its higher level of fees and charges the end comparison rate is higher.
|Loan option||Interest rate||Fees and charges||Comparison rate|
|Home loan A||8.00%||0.5%||8.50%|
|Home loan B||8.25%||0.1%||8.35%|
Australian Home Loan Comparison websites
There are numerous independent web-sites that provide an online comparison of the features and rates of the numerous home loan products available on the Australian market.
Canstar – An Australian based specialist research service that via a well formed methodology provides star ratings for financial services products including home loans. They currently rate over 1700 loan products.
Rate City – RateCity is powered by the data from Canstar in partnership with NineMSN. They offer an easy to use site that compares not only home loans but credit cards, banking and insurance products.
InfoChoice – Established in 1993 the site offers comparisons of home loans along with a wide range of other financial products including insurance, personal loans and banking.
Mozo – Short for ‘Money Zone’ Mozo offers a friendly, easy to use site where you can compare a range of loan products along with home loan reviews from Australian borrowers.
Note many of these sites may still earn a commission from referrals.