How to Find Reasonable Interest Rates for Your Home Loan


While purchasing a new home is exciting, it can also bring a lot of stress. For most people, buying a home is the most significant purchase that they will make. You will continue to make monthly repayments until the home loan is paid off.

The interest rate that you get for your home loan will directly impact these monthly repayments. If you want to limit the amount that you pay over the life of your loan, you should take the time to ensure that you are getting the lowest interest rates. It is always advised to research the home loan you need as many Australians have had problems repaying mortgages.

Fixed Versus Variable Interest Rates

Home loans either include a fixed or variable interest rate. With a fixed interest rate, the rate does not change throughout the life of your loan. You are locked in at the interest rate that is offered when you obtain the loan.

With a variable interest rate, the interest rate can fluctuate throughout the life of your loan. When you obtain a loan with a variable rate, the rate is primarily based on the current cash rate set by the Reserve Bank of Australia. However, lenders are free to set their variable rates.

You may also obtain a loan with a fixed term interest rate. Typically, the interest rate will remain fixed for a set term such as one to five years. After this term ends, the loan switches to the variable rate.

When looking at home loan options, you may see an interest rate listed as the comparison rate. This rate accounts for the various charges added to the loan. Australian lenders are required to present the comparison rate to give borrowers a more accurate indication of the rates.

Which Type of Loan Should You Choose?

The primary advantage of a fixed rate is that your interest rates never change. Whether the Australian economy is stable or going through a recession, the rates stay the same. However, variable rates can increase or decrease based on these economic factors. Lendi provide insights into all major lenders.

While variable rates can vary, they still provide a few benefits. With a variable rate, you may end up with a lower interest rate, resulting in lower repayments. The lower repayments may allow you the opportunity to pay off additional principal on your mortgage.

Top Factors That Influence Interest Rates

Besides the type of interest rate for your home loan, several other important factors influence the interest rate that you receive. If you are thinking of applying for you first mortgage, the Government provided useful details.

The first factor to consider when applying for a home loan is your credit standing. If you have bad credit, you may end up with higher interest rates. If possible, you may want to attempt to pay down some of your debt before applying for a home loan.

The location of your home also influences the interest rates. For example, when obtaining a loan to purchase a home in a rural part of Australia, you may find lower interest rates compared to buying a home in parts of Sydney.

The next factors to pay attention to include the price of the home, the amount of your deposit, and the amount that you need to borrow. If you cannot pay at least a 20% deposit on the house, you may end up with higher interest rates and the need to pay lender’s mortgage insurance.

Choosing the right type of home loan is just as important as finding the right home. Before applying for a loan, make sure that you compare options and look at the comparison rates to get a better idea of how much you may end up paying.

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