What is a comparison rate and is it important?
A comparison rate could help you uncover hidden fees in your prospective mortgage.
A home loan is a long-term debt, so you need to know about all the costs associated with one before committing — and that’s where a comparison rate can come in handy.
Read on to find out what a comparison rate is and how it could benefit you.
So what actually is a comparison rate?
A comparison rate includes both the loan interest rate and any associated fees combined into a single percentage, so there’s complete transparency in the total cost presented to you.
Sometimes a loan can look too good to be true, which is why a comparison rate is extremely important. By law, home loan lenders need to present you with a comparison rate, and this encourages them to be transparent about any other fees and charges that may be associated with your loan.
How is a comparison rate calculated?
A comparison rate is calculated in terms of industry regulations and determined by the following:
- A loan amount of $150,000
- A loan term of 25 years
- The repayment frequency
- The interest rate, including known changes to the interest rate such as introductory rates, interest-only periods and loyalty bonuses
- The fees and charges connected with the loan such as establishment fees, annual package fees, monthly fees, valuation/documentation/settlement fees
When comparing any finance offers you need to know all the fees and charges you are currently paying or will be charged. If an offer has the same advertised rate and comparison rate, then you know you won’t be slapped with hidden fees or charges.
How do I find a comparison rate for my home loan?
Joust removes any confusion for customers by requiring lenders and brokers to submit their comparison rate when bidding for your home loan. This feature is what makes Joust truly revolutionary and unique as you don't need to seek any independent advice to determine which is the best interest rate bid.
Want to learn more about how Joust works? Click here to find out.