Compare Australian Home Loans

These days there are a tonne of home loan options out there on the market, which means there’s sure to be an option that suits your needs - but that it can seem like a huge job to find it! That's where Mozo’s simple comparison tools come in.

We compare home loans from lenders all over Australia to help you sniff out the best mortgage rates, whether you’re buying your first family home, investing in your fifth rental property or refinancing a mortgage you’ve already had for a decade.

What is a home loan? 

A home loan or mortgage is a loan agreement between a borrower and a lender for the purpose of buying a home or property.  Australia has some of the most expensive real estate in the world, so for the majority of people who want to purchase a property or home, they need to borrow money from a bank or lender to do it. 

The loan is secured against the property and paid back over a period of time.  
Home loan terms in Australia are usually 25 - 30 years. Over this time, you as the borrower will pay back the principle amount of the loan plus interest. 

This is why it is so important to compare home loans. Every cent that you can save on interest and fees, means more money you can put towards owning your home.  

How to compare home loans

Home loan comparison is not all that different from comparing a new phone or dishwasher. Essentially, you're after the best priced loan with all of the features you need. Like purchasing a new phone or dishwasher, you may also want to take out your home loan with a brand that you can trust and has good customer service. 

Let's break down the top three steps to comparing home loans in a bit more detail...

3 step checklist for comparing home loans

1. Home loan interest rates

With a home loan, the best price really comes down to the interest rate, so that's where to start your comparison. Fees like upfront fees and ongoing fees do come in to it, but the interest rate is usually the biggest factor in determining the overall cost of the loan. A good way to kick off your comparison is to start with the lowest rate home loan in the table and review the features it offers. The lowest mortgage rates on the market are usually offered by smaller lenders such as online lenders and smaller banks.

Taking out a home loan with one of these lenders can be far cheaper than going with a big bank as the interest rates on offer can be over 1% lower, but you'll also need to weigh up what sort of features are on offer for the price and whether you're even eligible.

2. Home loan eligibility

These days, the best home loan rates are often reserved for the best quality borrowers, but how does a lender determine whether you're good quality or not? Much of it comes down to what type of borrower you are and how much deposit you have. Owner occupier borrowers looking for a principal and interest loan can generally access the lowest rates. By contrast, investor borrowers and those after an interest only home loan may find they have to pay higher interest rates.

Many lenders also offer lower rates to borrowers with lower loan to value ratios. As an example, say you're looking to refinance your current home loan and you have 30% equity in your property, that means you have a loan to value ratio (or LVR in industry speak) of 70% and may be able to access cheaper rates than a borrower with a higher LVR of say 90%. 

3. Home loan features

Important features to consider when comparing home loans include extra repayments, redraw, offset account and split loan functionality. Basic features like the ability to make free extra repayments and free redraws are pretty standard these days, even with the cheapest home loans on the market. However, if you want an offset account you may find your choice of home loan more limited. Some low interest rate loans do offer offset accounts, but by no means all.

Offset accounts can be great tools for reducing the amount of interest that you pay on your home loan, so it's worth shopping around for this feature if you think you can make good use of it by depositing your salary in the offset account in month. An offset account functions just like a normal transaction account, but the money in it is offset against your loan balance to reduce your interest bill.

Now that you’ve read our 3 step checklist to comparing home loans, scroll back up to the top of this page to start your comparison. If you’d prefer to first learn a bit more about the different types of home loans available in Australia, keep on reading.

Types of home loans in Australia

1. Variable rate home loan

This is the most common type of home loan in Australia as historically variable rates are lower than fixed. With a variable rate home loan, your repayments can be affected by your interest rate going up or down when the Reserve Bank changes the cash rate or if your bank decides to be generous (or greedy) during your loan term. These loans suit borrowers who want flexibility such as the ability to make extra repayments and who aren't concerned by the possibility of their interest rate going up or down over the course of the loan.

2. Fixed rate home loan

A fixed rate means that your repayments are locked in for a fixed term (usually 1 - 5 years). At the end of the fixed term you will get the option to refix your loan at a new market rate or switch to a variable rate. Budgeting is made easier on a fixed rate home loan as you don't have to worry about your rate or repayments changing for the fixed loan term. The main drawback of a fixed rate loan is you won't benefit from any rate drops while you're on the fixed term, but the upside is that you're also protected from rate increases. Fixed rate loans can be less flexible than variable loans with limited ability to make extra repayments and if you pay out the loan early, you could be up for high fees and penalties.

3. Split rate home loan

A split rate home loan is when your lender splits your home loan so that a portion of the borrowed amount is on a variable rate and the remainder is on a fixed rate. This is a popular loan option as borrowers have the flexibility to make extra repayments and redraw on the variable portion of the loan, but are less exposed to rate increases and budgeting uncertainty by having part of the loan fixed.

4. Low deposit home loan

This is a type of loan that enables borrowers to borrow with as little as a 5-10% deposit, rather than the usual 20%. Low deposit home loans are popular with first home buyers as it is a way for them to get on the property ladder without having to save up a sizeable deposit. 

5. Investment loans

If you’re looking at borrowing money for an investment property your financing options will be different from an owner-occupier. Investment loans will have specific interest rates, fees, LVR requirements and repayment options tailored to investors.  

6. Offset home loans

A home loan with an offset account is a way for you to reduce the amount of interest you’ll pay back over the life of your loan. With an offset account, instead of being charged interest on your full mortgage amount, you’re only charged interest on how much you’ve borrowed, minus the balance of your home loan offset. So if you have a home loan of $500,000 and have $10,000 savings in your offset, you’ll only be charged interest on $490,000.

How much money will I be able to borrow?

Buying a home is exciting, but before you get carried away dreaming about seafront
mansions, it’s a good idea to come down to earth and crunch the numbers
on just how much you can borrow. 

How much a bank will lend you will depend on a number of different factors, and the end figure might be a lot different to what you’re expecting. We’ve made it easy to see what kind of budget you might have, with our home loan borrowing calculator. So take it for a spin before you set your heart on a property.

How much should I save as a deposit?

Saving up a deposit is the first hurdle to buying your home - but how much do you need? As a rule of thumb, you should aim to save at least 20% of the property’s
value as your deposit. This gives you a loan-to-value ratio (LVR) of 80%, which is pretty standard for home loans, and often means you can score some of the best interest rates around.

To help borrowers get into the market quicker, there are also home loans available for borrowers with deposits of 5% or 10% of the property’s value. But if you have a smaller deposit like this, remember that you will need to pay Lenders Mortgage Insurance (LMI) on top of your loan, which can add thousands of dollars to your total cost. 

What home loan fees will I need to budget for?

There are a number of fees that may apply to your home loan and which you’ll need to budget for. These include:

• Application fee. This is an upfront fee that you pay in order to first apply for a home loan.
• Service fee. This might be charged monthly or annually, and covers the cost maintaining your loan. Generally, the morebells and whistles included in your loan, the more likely it is to include a service fee.
• Legal, valuation and settlement fees.Other fees you may pay upfront, these cover the cost of legal paperwork, as well as the cost for someone to value your property and bepresent at the settlement of your loan.
• Discharge fee. You might wind up paying a discharge fee when you pay your loan off in full.
• Feature fees. You may also pay a fee for certain features included in your home loan, such as extra repayments, a redraw facility or an offset account. Not all home loans charge fees for these, so make sure you’re not paying a fee when you don’t have to.

Am I eligible for any home loan grants?

There are a number of Australian state and federal government programs in place to help you break into the property market. Some can even be used in tandem with other grants and concessions you might be eligible for, potentially allowing you to purchase a home even sooner. We’ve compiled the main ones below. 

1. First Home Loan Deposit Scheme

For those hoping to take their first steps up the property ladder, the First Home Loan Deposit Scheme (FHLDS) can provide a much-needed boost. This program lets eligible first home buyers purchase a home with a deposit of as little as 5%, with the remaining amount guaranteed by the government.

As part of the 2020-21 Federal Budget, the Australian Government announced it will make an additional 10,000 places available on 1 July 2021. This iteration of the scheme will be known as the New Home Guarantee, and will cater specifically to first home buyers building or purchasing new homes.

While the FHLDS is administered by the National Housing Finance and Investment Corporation, it does not accept applications directly. To apply, you’ll need to register your interest with a participating lender or one of their authorised representatives, such as a mortgage broker. 

2. First Home Owners Grant

The First Home Owners Grant (FHOG) is a national scheme that subsidises the purchase or construction of homes that are newly built, substantially renovated or purchased off the plan. Like the FHLDS, it is only available to those who have not owned a home or other residential property before. The amount on offer will differ depending on the state or territory and whether you’re purchasing or building a new home, so be sure to look over the details on the relevant revenue office website.

3. Family Home Guarantee

Announced as part of the 2021-22 Federal Budget, the Family Home Guarantee will allow single parents to purchase a property with a deposit of as little as 2%. It is due to commence on 1 July 2021, and hopes to eliminate some of the obstacles single parents face when saving to purchase a home.

Importantly, the scheme can be used to purchase new builds or existing homes, and both first home buyers and those re-entering the market can apply. To qualify, applicants must be single parents with dependents, above the age of 18, and have an annual taxable income below $125,000. Property price thresholds will also apply, with amounts varying between capital cities, regional centres with a population of more than 250,000, and other regional areas.