To compare home loan rates properly, line up the interest rate, the personalised comparison rate, the fees and the features of each loan on the same loan amount and term, using each lender’s Key Fact Sheet. The lowest advertised rate is only the starting point. A loan that looks cheapest on a banner can cost more once fees, missing features and the end of a fixed or introductory period are counted.

This guide shows you what to compare, in what order, and where the traps sit, whether you are buying your first home, refinancing or investing.

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TL;DR

Compare the interest rate and the personalised comparison rate together, because the comparison rate adds most fees to the picture.
Ask every lender for a Key Fact Sheet based on the amount you are likely to borrow. Its uniform layout lets you compare like for like.
Check break costs, extra repayment rules, offset and redraw, and what happens when a fixed or introductory rate ends.
Advertised variable rates often have room for a discount, so ask for a better rate before you sign.
Put your shortlist in one place, run the repayments, then decide. Nexara helps you do that inside one app.

Interest rate vs comparison rate: what each one tells you
Use the Key Fact Sheet to compare like for like
Fees to include when you compare
Fixed, variable or split: which structure fits you
Features that change the real cost of a loan
How your deposit and circumstances shape the rate
Ask for a discount before you accept the rate
A simple method to compare home loan rates
Compare and plan from one app with Nexara
Our perspective
FAQ
Sources

Interest rate vs comparison rate: what each one tells you

The interest rate is the yearly percentage charged on the money you borrow. It drives your monthly repayment. The comparison rate is a second figure that combines the interest rate with most fees, so it gives a fuller picture of what a loan costs overall. Moneysmart, the consumer finance site run by ASIC, points borrowers to the personalised comparison rate when they weigh up loans.

Two loans can carry the same interest rate and very different comparison rates. The gap is usually fees: application, establishment, ongoing account-keeping and similar charges. A loan with a slightly higher rate and no annual fee can beat a lower-rate loan with a hefty package fee, especially on a smaller balance.

The comparison rate is a guide, not a verdict. It is built on a standard reference loan, which may not look like yours in size or term, and it does not capture every cost or feature you might use. Treat it as a quick filter, then confirm the detail in the Key Fact Sheet.

Interest rate vs comparison rate: what each one tells you

Use the Key Fact Sheet to compare like for like

Every lender advertises rates in its own way. The fix is the Key Fact Sheet, a document each lender must provide for a standard home loan on request. According to Moneysmart, it is compulsory and uses the same layout for every home loan across every lender, so you can set two or three of them side by side.

When you request one, give the lender the amount you are likely to borrow. The figures in the sheet depend on that amount, and a sheet built around a different loan size will mislead you.

On each sheet, check these items:

the loan amount and term
the type of interest rate (variable, fixed or split)
the personalised comparison rate
the repayment amount and how often you pay
establishment and ongoing fees
the total amount you would pay back
what happens to your repayments if rates rise

Write the numbers in a simple table, one column per lender. Gaps become obvious quickly.

Fees to include when you compare

The headline rate leaves out costs that matter. Build a full picture by listing both the fees in the comparison rate and the ones outside it.

Usually part of the comparison rate: application, establishment, settlement, ongoing account-keeping and discharge fees.

Often not captured by the comparison rate: fees for optional features, government charges, late-payment fees, lenders mortgage insurance (LMI) and conditional costs such as break costs on a fixed loan.

Home loan fees inside and outside comparison rates

Break costs deserve a special mention. Moneysmart tells borrowers to ask about break costs if they repay early or refinance, and about what happens when a fixed or introductory rate ends. A cheap introductory rate that reverts to something much higher after the first period changes the maths completely, so ask what the rate becomes afterwards and compare that figure too.

If you are refinancing, add the cost of switching: discharge fee on the old loan, application fees on the new one and government charges. Your interest saving needs to be large enough over the time you will hold the loan to justify all of that.

Fixed, variable or split: which structure fits you

The type of rate changes both your cost and your flexibility. Moneysmart’s fixed vs variable comparison summarises the trade-offs.

	Fixed rate	Variable rate	Split loan
Repayments	Locked for the fixed period	Can move up or down with the lender’s rate	Part locked, part moves
Extra repayments	May be limited	Often allowed	Flexible on the variable part
Switching or refinancing	May trigger break fees	Generally easier	Break costs can apply to the fixed part
Features such as offset and redraw	May be fewer	Often available	Usually on the variable part

A fixed rate suits people who need certainty about repayments and do not expect to pay the loan down faster or refinance during the fixed term. A variable rate suits people who want to make extra repayments, use an offset account or keep the option to switch. A split loan, which divides the loan into fixed and variable portions, balances the two: you gain certainty on one part and flexibility on the other.

There is no universal winner. Decide what matters more to your budget over the next few years, then compare rates within that structure.

Features that change the real cost of a loan

A loan with more features can carry a higher rate or extra fees. Moneysmart notes that loans with extras such as offset accounts or redraw can cost more, and suggests weighing whether you will actually use them.

Offset accounts

An offset account is a transaction account linked to your home loan, generally available on variable rate loans. Its balance reduces the amount of the loan on which you are charged interest. Moneysmart’s example: on a $750,000 loan, keeping $50,000 in the offset means you pay interest on $700,000. If your offset balance will always sit under about $10,000, the feature may not earn back its cost.

When comparing, check the interest rate, any annual or package fee, and any monthly fee for the offset account. Also ask whether the offset is a full one or a partial one, since some lenders offset only part of the balance.

Redraw facilities

Redraw lets you access extra money you have paid into the loan. Some lenders limit how much you can redraw, charge a fee or delay access. The Queensland Government advises borrowers to think about how often they will use redraw, because fees per withdrawal, minimum redraw amounts and yearly limits can apply.

Extra repayments and repayment frequency

Variable loans often allow extra repayments freely, while fixed loans may cap them. Moneysmart also points out that switching from monthly to fortnightly repayments means the equivalent of an extra month’s repayment each year. Ask each lender whether extra repayments are free and whether the frequency can be changed later.

Here is a sense of the stakes. One broker’s worked example for a hypothetical $500,000 loan at 5% over 30 years found that an extra $200 a month saves about $77,470 in interest and pays the loan off roughly 51 months sooner. Your numbers will differ, but it shows why repayment flexibility belongs in the comparison.

Basic or feature-rich?

ASIC’s consumer guidance notes that a basic, no-frills loan usually has a lower rate than one with more features. Be honest about what you will use. If you will park savings against the loan and make regular extra repayments, a feature-rich loan can pay for itself. If you simply want the lowest cost and plan to leave it alone, a basic loan may fit better.

How your deposit and circumstances shape the rate

The rate you are offered is rarely the rate on the banner. Lenders price in tiers based on your loan-to-value ratio (LVR), which is your loan divided by the property’s value. Lower LVRs generally unlock more competitive rates, with borrowers below 60% typically accessing the lowest pricing.

That has practical consequences:

First home buyers with a smaller deposit often sit in a higher LVR tier, so compare rates at your actual LVR, not the best advertised one. LMI can also apply and sits outside the comparison rate.
Refinancers may have a lower LVR than when they first borrowed, because they have repaid principal or the property has risen in value. That can open a better pricing tier.
Investors should compare loans for investment purposes specifically, as rates and features can differ from owner-occupier loans.

Which options you can access also depends on your income, expenses and each lender’s eligibility rules, so a shortlist should be tested against your own circumstances rather than the best case.

Ask for a discount before you accept the rate

Advertised variable rates are often a starting position. The ACCC’s home loan price inquiry found that discretionary discounts off headline variable rates are common, and that borrowers who ask for a better rate can often get an additional discount.

So once you have your shortlist, ask each lender what rate they can offer for your LVR and loan size, and whether that rate is the lowest they can do. If you are an existing customer, the same logic applies: the rate you pay today may not be the best your lender would give you if you asked.

A simple method to compare home loan rates

Define the loan. Settle on the amount, term and purpose (owner-occupier or investment). Estimate your LVR.
Pick a structure. Decide whether certainty, flexibility or a mix suits you, which points you to fixed, variable or split.
Shortlist three to five loans on interest rate and personalised comparison rate.
Get the Key Fact Sheet for each, based on your likely borrowing amount.
List fees and features in one table: establishment and ongoing fees, offset, redraw, extra repayment rules, break costs, and what happens after any fixed or introductory period.
Run the repayments. Moneysmart recommends using its mortgage calculator to see repayments and total cost for different rates and terms.
Ask for a discount from your top choice, then compare the final offers.
If refinancing, subtract switching costs from your expected savings over the period you will hold the loan.

The method is simple. The hard part is keeping the numbers in one place and not losing track of rates, fees and your own spending while you work through it.

Compare and plan from one app with Nexara

We built Nexara to take the admin out of everyday money, and home loans are one of the biggest pieces of it. Inside the app you can look at home loan options alongside the rest of your finances: your accounts, bills, investments and, if you deal in more than one currency, your multicurrency activity. That helps you test a loan against the real shape of your budget instead of an advertised best case.

Our financial assistant, Xara, is designed to give you clear, user-friendly insights when a decision feels complicated, such as how a repayment sits against your regular bills.

See how it all fits together on the Nexara products page, or start from the Nexara home page. If you want to know how your information is protected first, read about security and control.

Our perspective

Most people compare home loans the way they compare phone plans: they sort by the lowest number and move on. A home loan is a thirty-year relationship, and the number on the banner is only one line of it.

What we see is that the loan only makes sense when it is read next to the rest of your money. A repayment that looks fine in isolation can squeeze the month once bills, subscriptions and savings goals are counted. A feature like an offset account is only valuable if you will genuinely keep a balance in it, and you cannot judge that without seeing your own cash flow.

That is why we put home loan options, everyday accounts, bills, investments and multicurrency into one app, and why Xara is there to turn the complicated parts into plain language. Our aim is that you choose a loan with a clear view of your financial landscape, not just a good-looking rate.

Shaye

FAQ

What is a good home loan rate in Australia?

A good rate is one that is competitive for your loan size, LVR and loan type, and that stays competitive once fees are counted. Lenders price in tiers, so a borrower with a lower LVR can typically access sharper rates than someone with a small deposit. Check the personalised comparison rate and ask the lender whether a discount is available.

Is the comparison rate the only number I need?

No. The comparison rate is a useful guide because it folds most fees into one figure, but it does not capture everything, such as optional feature fees, government charges, LMI or break costs. Use it to build a shortlist, then confirm the detail in each Key Fact Sheet.

Should I choose a fixed or variable rate?

It depends on what you value. Fixed rates give repayment certainty but may limit extra repayments and can carry break fees if you switch. Variable rates tend to offer more flexibility, including extra repayments, offset and redraw. A split loan lets you divide the loan between the two.

Is it worth paying for an offset account?

It can be, if you will keep a meaningful balance in it. Moneysmart’s example shows a $50,000 offset on a $750,000 loan reducing the balance charged interest to $700,000, while a balance that stays under about $10,000 may not justify the extra cost. Compare any annual or monthly fees against the interest you would save.

How much does it cost to refinance a home loan?

Costs typically include a discharge fee on your current loan, application or establishment fees on the new one and government charges. Add them up and compare the total with your expected interest savings over the time you plan to keep the loan. If the new loan has fewer features, include what you would lose.

Sources

Written using BabyLoveGrowth’s AI

Borrowing & credit

Borrowing & credit

How to Compare Home Loan Rates in Australia