In order to help us choose between lenders & loans by law a home loan comparison rate must be offered or displayed to you. Without a comparison rate one bank could advertise a loan @ super low interest rates but have heaps of hidden fees and we might make our decisions based on false information.
The home loan comparison rate is calculated based on a set scenario. For example a comparison rate could be based on a 3 years of having a $150,000 home loan on a 25 year loan term, with principal & interest repayments. It includes all the hidden fees and charges to the interest rate for you.
Problem is that your specific situation will not be exactly a loan of $150,000 etc. Your loan amount will be different; you may have a 30 year loan term, pay interest only & plan to sell the property in 1 year. So how do you compare the cost of 2 different loans?
Being a mortgage broker myself I have never liked to use comparison rates to compare between loans. Don't get me wrong it is a good thing if it saves people being ripped off but there is a better way - being thorough.
To solve this issue we have to manually calculate on your specific example. Actually take the home loan multiply the interest rate and add in the fees. You will find with a large mortgage the interest rate will change the results more than the fees and with a small loan the converse is true.
In order to calculate between loans you need all hidden introductory costs, ongoing costs & possibly exit costs of the loan along with the interest rate. Yes, they can be hard to find, not always easily accessible from websites and with so many different names attributed to fees, but being thorough and applying your own situation is the only way to see the true picture.
Good luck with your research. We hope you find our site useful, but if you want one of our in-house mortgage brokers do the home loan comparison rates calculations for you - feel free to submit the enquiry form on this page or call us on 1300 793 143.