How to shop for a home loan in 2024

Finding the right home loan takes time. And so it should. It’s a big commitment to buy a home.

But by taking the right steps and asking yourself the right questions, you can make it a little easier to find a home loan that ticks all the right boxes.

Consider different lenders

Most people tend to gravitate towards the major lenders when it comes time to pick a home loan.

In fact, about three-quarters (75%) of home loans in Australia are with one of the Big Four banks, according to the Australian Financial Review .

That’s despite the Big Four (ANZ, CBA, NAB and Westpac) having higher home loan interest rates than the average owner-occupied, variable rate in our database†:

• Average Big Four variable rate: 7.48% p.a. 
• Average non-Big Four variable rate: 6.81% p.a. 

Rather than picking one of those four, compare home loans to see if you can’t find yourself a lower rate. 

You’ll often find smaller lenders offer lower interest rates because they don’t have as many overheads (e.g. bank branches and hundreds of branch staff). 

Then, there are mutual funds and credit unions. These aim to provide value for their customers, not investors. 

In summary, don’t just go with the last lender you saw advertised. Compare home loan rates and keep an eye out for special offers.

†Average owner-occupied variable home loan interest rates (P&I, $400k, <80% LVR) correct as of 23 February 2024. 

Understand the comparison rate 

Lenders are required to show you what’s known as a comparison rate. It has to be shown next to the interest rate in brackets (like this).  

Why is the comparison rate important? Well, it combines the interest rate with any extra charges related to the loan, like fees, to give you a more accurate picture of how much it’ll cost you. 

Some comparison rates are much higher than the interest rate, so don’t get comfy with low headline rates, only to get hit with high fees. 

Instead, use the comparison rate to help you weigh up your options and make a choice that could save you money. 

Keep an eye on fees 

As mentioned when we talked about comparison rates, home loan fees can catch you by surprise. 

Home loan fees can include:

• Ongoing fees. These can be yearly or monthly, but aren’t super common.
• Upfront fees. Upfront fees include application, valuation, and settlement fees. 
• Discharge fees. This is a fee that you’ll be charged when you pay off your home loan in full, when you sell your property (if you still have a home loan), or when you refinance your home loan. 
• Exit fees. If you want to get out of your fixed-rate home loan early, you’ll have to pay an exit fee. These can be pretty expensive. 
• Split loan fees. If you wind up getting a split home loan, your lender may charge you a fee to use it. 

So, make sure you understand what fees you’ll be charged at the beginning, throughout, and at the end of your home loan, to avoid any nasty surprises. 

Know which features you want 

Aside from the interest rate, an important aspect of choosing a home loan is also knowing which features you want, and which you don’t. 

Some common features you can get with your home loan include: 

• Offset account
• Redraw facility
• The ability to make extra repayments
• Split rate option
• Home loan top-up
• Repayment holiday

Of course, using these features may cost you a little extra. For instance, we’ve seen offset accounts in our database that add an extra 0.10% to your interest rate, or require you to pay a monthly fee. 

Narrow down your ‘wants’ to a list of ‘must haves’, so you’re not paying a premium for something you won’t use.

Be mindful of your credit score 

Seeking pre-approval? Limit the number of applications you send out. 

When a lender checks your credit report, it triggers what’s known as a ‘hard enquiry’. 

Too many hard enquiries over a short period of time can give banks the impression that your applications are being rejected, which can wind up hurting your chances of getting approved.

So instead of applying with multiple lenders in the hopes of finding the best deal, do plenty of research beforehand and hone in on one or two lenders that seem to suit best.  

Sign up for the shortest term you can afford

Stretching out your home loan term can make your repayments easier to manage, but you’ll only wind up paying more in interest over the long run. Let’s look at an example.  

Let’s look at an example, using a mortgage repayment calculator.  

If you have a $400,000 loan with a 6.5% p.a. interest rate, the difference between a 25-year and 30-year loan could mean you pay an extra $99,929 in interest. 

Sure, you might have lower monthly repayments if you opt for a 30-year home loan over a 20-year one, but savings of almost $100,000 might be worth it if you can afford it. You still want to give your budget some breathing room. 

Ready to start your search? Visit our home loan comparison page, where you’ll be able to filter your search by rate and type.