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December 3, 2023
Forgiven For Life – Lifestyle Blog
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What is meant by home loan comparison rate?

A home loan comparison rate is a percentage rate which mainly represents a close estimate of the total cost of the loan per annum. Typically, the comparison rate includes repayments per month, the interest rate, as well as ongoing and upfront charges and fees. It helps customers to identify the true value of the loan. This is how you can easily compare home loan rates now.

In the first few years of your housing loan, it might appear that you are going nowhere fast, but if everything goes fine, you will be making a steady progress. Always remember, the longer you will be paying off your housing loan, the less interest you will be charged every month and more amount you will be chipping away from the principle.

Here is the method to use the home loan comparison calculator:

By using the Interest and Principal Calculator, simply enter the following details:

  1. Your amount of loan
  2. Loan period
  3. Interest rate
  4. Any extra repayments if you are making

How to actually read the results obtained?

The Principle and Interest Calculator will show you the breakdown reflecting how much of your repayments will be going towards the interest and what amount towards the principle every month. It even shows a running total on the amount you have paid towards each, and the principle you will have remaining at the end of each year.

You can try paying with various different extra repayment amounts to find out how much they might reduce your interest charges as well as time spent to pay off your home loan.

The comparison rate should be used for guidance only, to compare ‘like for like’ products. It does not calculate each and every possible cost in a loan, provided the charge might not be applicable to all borrowers, like – late payment fees, break fees for fixed-rate loans, or redraw fees. It does not necessarily include external charges which vary between territories and states, like the government stamp duty, which is commonly added to the balance of home loan, or conveyancing fees.

Does the comparison rate make any big difference?

Yes, in most of the cases. The comparison rate for a particular home loan can reveal a big difference in costs between 2 loans, which have the same advertised rate of interest. If you wish to consider interest rates (even known as annual percentage rates, the advertised rate or headline rate), you might assume that these two loans would cost the same. But the home loan comparison rate reveals a different type of story – a single loan can really cost a significant chunk, more than the other.

In contrast to this, one of the 2 loans might offer different aspects, like – the option to redraw, an offset account, flexible repayment schedules, or portability, that make it worth the added cost to you.

By choosing to compare with iSelect, you can have these benefits: No additional cost; you can save on hours of research; easily compare more than 25 Australian lenders from a vast range of providers.

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