Don’t be fooled by the advertised interest rates!
Be careful when looking at different advertised interest rates as these may not truly represent what you’ll be paying when you get a loan.
Why?
Well a bank may offer you a really low interest rate, say 3.84%, but this ‘advertised interest rate’ doesn’t factor in any additional fees and charges. So although the interest rate seems cheap at first glance, you may actually be paying a lot of extra money over the lifetime of the loan.
So how do you know how much you will actually be paying if you get a home loan?
That’s where comparison rates come in. These were introduced to help borrowers determine the ‘real’ cost of getting a loan. The comparison rate takes the advertised interest rate and then adds in additional expenses including establishment fees, ongoing fees, valuation fees etc.

The comparison rate gives you a true indication of how much a loan will cost and you can easily compare loans from different lenders to find the lowest comparison rate.
So once the low advertised interest rate factors in other fees and charges, the true cost of the loan (comparison rate) may be a lot higher, say 4.22% for example.
You can then compare the comparison rates of different home loan products from different lenders to find which one will be the cheapest based on your needs.
In this short video, Orange mortgage broker Barry Swain explains exactly what a comparison rate is and shows a couple of examples of how they can be useful to borrowers looking for the best deal on their home loan.
Video Explanation
In this short video, Orange mortgage broker Barry Swain explains exactly what a comparison rate is and shows a couple of examples of how they can be useful to borrowers looking for the best deal on their home loan.
Limitations of comparison rates
Although comparison rates are a very useful tool for borrowers, there are some costs that aren’t included in the comparison rate including:
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Stamp duty or mortgage registration fees
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Lenders mortgage insurance
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Default charges
To find out which home loan is the best for you, don’t just rely on the advertised interest rate or even the comparison rate. Get the help of a professional mortgage broker with over 25 years of industry experience. With access to over 25 different lenders, Barry will find you a great deal on a home loan that will suit your individual finance needs.