Compare Australia’s best home loans from 4.74% p.a.

A home loan is an amount of money that you borrow to finance the purchase of a property.

A home loan works in a similar way to any other loan. You borrow an amount of money to fund the purchase of a property or land and you pay that money back (known as the principal), plus interest, over a period of time.

There are a range of different factors that determine the repayment amount.

• Loan term: the typical loan term for a mortgage in Australia is 25 to 30 years, but you can have a loan term for less than this.

• Interest rate: borrowers have a choice between fixed rate and variable rate home loans. Some lenders offer split home loans, where a portion of the loan is fixed and the other portion is variable.

• Type of repayment: for owner-occupier home loans, the standard repayment type is principal and interest (P&I). There is also an interest-only (IO) repayment structure, where you only pay back the interest you are charged – this is a popular option for investment loans.

• Repayment frequency: the standard home loan repayment is made monthly, but many lenders also offer weekly and fortnightly options.

There are two types of home loans: owner-occupied and investment home loans.

• Owner-occupied home loans are for borrowers who want to live in the home they are buying (in other words, a property occupied by the owner).

• Investment home loans are for property investors who want to rent out the property they purchase to tenants.

There are two main types of home loan interest rates you can choose: fixed rate and variable rate.

• Fixed rate home loans come with an interest rate that stays the same for a set period, typically between one to five years.

• Variable rate home loans come with an interest rate that can rise and fall over time, typically in line with the Reserve Bank of Australia’s (RBA) cash rate.

A comparison rate represents the ‘true’ cost of a home loan by wrapping the interest rate, fees and charges of a particular loan into a simplified percentage figure. This makes it easier to compare home loan costs from different lenders.

Learn more about how comparison rates are calculated.

There isn’t a single best lender for everyone but there will be a best home loan for you. While the Big Four banks (ANZ, CommBank, NAB and Westpac) are the biggest mortgage lenders in Australia, they do not always have the best rates. You can use our comparison tool above to compare all home loans in our database and shortlist ones that have the best rates and features for your needs.

Each year we also conduct a review of the mortgage market for the Mozo Experts Choice Awards for Home Loans. For this year’s awards we compared 444 home loans from 97 lenders. We run a number of scenarios across 10 categories to find the home loans that deliver the best value for Australian borrowers.

The standard deposit for a home loan in Australia is 20% of the property’s value. It is possible to buy a home with a deposit of less than 20% by using government schemes, such as the First Home Guarantee scheme, and by opting for a low deposit home loan and paying lender’s mortgage insurance.

The interest on your home loan is calculated daily, based on your outstanding balance. Read our guide on how mortgage repayments are calculated for more information.

Your loan-to-value ratio (LVR) is the amount you borrow, expressed as a percentage of the value of the property you buy. For example, if you want to buy a property worth $1 million and you have a deposit of $200,000, you’ll need to borrow $800,000. This gives you an LVR of 80%.

When you first apply for a loan, your LVR is determined by your deposit size. The higher your deposit is, the lower your LVR will be. But your LVR can also change over time, as you pay off more of your home loan, or as your property value goes up and down.

Some lenders offer low deposit home loans, and lenders mortgage insurance (LMI) is an insurance product that allows you to get a home loan without a full 20% deposit. The cost of this insurance is usually added to your home loan amount and it is designed to protect your lender financially in the case of a default – it does not protect you.

See our guide on the difference between LMI and mortgage protection insurance.

Home loan interest is not tax-deductible for owner-occupiers. However, property investors can claim interest as a tax deduction if they have an investment home loan. 

Once your fixed rate term expires, your home loan will revert to a variable rate set by your lender. This new rate may be higher or lower than your fixed rate, depending on market conditions. You may have the option to:

• Refix your loan for another term (if your lender offers it)
• Negotiate a better variable rate with your current lender
• Stay on the rollover variable rate (known as the revert rate)
• Refinance your mortgage with a new lender

Some fixed rate home loans allow extra repayments, but there are often limits on how much you can repay each year. If you exceed the limit, you may incur fees or break costs. Always check with your lender before making extra payments.

Break costs are fees charged by lenders when you exit a fixed rate home loan before the fixed term ends. These costs can be high and are calculated based on:

• The remaining term on your loan
• The difference between your fixed rate and the current market rate
• The amount you have left to repay

Advantages of a having a variable rate include:

• Flexible repayments: you could pay off your mortgage faster by making extra repayments.

• Access more features: variable home loans can offer features such as offset accounts and redraw facilities to help reduce the interest you’re charged.

• Pay less when rates fall: when the cash rate falls, variable home loan rates tend to fall too. This can mean the interest portion of your mortgage repayments decreases, leaving you with more money in the bank.

Disadvantages of a variable rate include:

• Pay more when rates rise: when the cash rate rises, variable rates typically increase too. A higher variable rate means you’ll pay more interest.

• Vulnerable to rate rises: variable rates fluctuate in line with the cash rate set by the RBA, which can make you vulnerable to rate rises and make budgeting inconsistent.

Leading smaller lenders and customer-owned banks typically offer lower variable rates compared to the ANZ, Commonwealth Bank, NAB and Westpac, so consider lenders outside the Big Four when you’re ready to apply.

Your loan-to-value ratio (LVR) also has an impact on what interest rate your lender can offer you, because LVR refers to how much you need to borrow in comparison to the value of the property. Generally speaking, the less you need to borrow, the lower your interest rate could be.

You can also search all lenders in the Mozo database using our filters, or look at the winners list of the Mozo Experts Choice Awards for Low Cost Home Loan.

An offset account is a transaction account that allows you to reduce how much interest you’re charged. You won’t pay interest on your loan balance equal to the amount of money you hold in your offset account. 

For example, if you have a $500,000 home loan debt and $50,000 in your offset account, your home loan interest will be calculated on just $450,000. 

Read our guide on how offset accounts work for more information.

A home loan redraw is when you withdraw extra repayments you’ve already made on your home loan to use the money for another purpose. Depending on the lender, sometimes there is a redraw fee or minimum redraw amount required. Learn more about home loan redraws.

Home loan pre-approval is when a lender approves you as a suitable candidate for a home loan and indicates how much it’s willing to let you borrow – subject to conditions.

The purpose of getting pre-approval is to understand how much you can feasibly borrow to buy a property, and by setting a budget, it helps you go house hunting with some confidence.

The key information lenders will need for a home loan application is:

• Identification documents
• Income details
• Expenses
• Assets
• Details of the property (if you’ve already found one)

The great news about digital home loans is that applying online reduces the time it takes to get approval. Depending on the lender it can take as little as a few hours to a few days to get pre-approval (assuming you have all the information required to process the application). Full loan approval through to property settlement can take approx 4 -6 weeks.

The standard loan term for a home loan is 25 years, though many lenders offer home loans for terms up to 40 years.

It is important to get the shortest loan term you can afford. The longer the loan term the more interest you’ll pay, but the lower your regular loan repayment will be. The shorter the loan term, the higher your regular repayment but you’ll pay less in interest. Use our mortgage repayment calculator to see what the difference in repayments will be between different loan terms.

A mortgage broker is a go-between who can help borrowers arrange home loans through banks and lending institutions.

A mortgage broker can help:

• Calculate how much you can afford to borrow.
• Compare home loan options best suited for your goals and budget.
• Walk you through how each home loan works, plus associated costs like interest, fees and features.
• Apply for a home loan on your behalf and oversee the settlement process.

Mortgage brokers tend to receive commission payments from lending institutions, so you usually won’t have to worry about paying them (though some mortgage brokers may charge service fees). See information about the role of mortgage brokers.