How to Compare Home Loans in Australia: 9 Things Beyond the Rate

Banks and lenders advertise headline interest rates to attract borrowers, but the advertised rate rarely tells the full story. Two loans with identical headline rates can have very different total costs due to fees, features, and how the rate is structured.

A loan at 5.99% with a $395 annual fee and no offset account may cost more over 30 years than a loan at 6.15% with no annual fee and a 100% offset account where you maintain $30,000. This is why ASIC requires lenders to publish a comparison rate alongside the advertised rate. The comparison rate factors in most fees and charges to provide a more apples-to-apples comparison — but even it has limitations, as it's calculated on a standardised $150,000 loan over 25 years, which may not reflect your actual borrowing amount.

Variable rate loans fluctuate with the market — when the RBA changes the cash rate, your lender will typically adjust your rate accordingly. Variable loans offer flexibility: you can usually make unlimited extra repayments, access offset and redraw facilities, and switch or refinance without break costs.

So what does this actually mean? Fixed rate loans lock in a rate for one to five years, providing certainty over your repayments. The trade-off is that fixed loans often restrict extra repayments (typically capped at $10,000 to $20,000 per year), don't include offset accounts, and attract break costs if you refinance or sell during the fixed term. Break costs can be substantial — sometimes exceeding $10,000.

Many borrowers split their loan, fixing a portion for repayment certainty while keeping the rest variable for flexibility. In the current rate environment, compare fixed and variable rates carefully before committing.

Home loan fees come in various forms and can add up significantly over the life of the loan. Common fees include: application or establishment fees ($200 to $600), annual or monthly package fees ($120 to $395 per year), valuation fees ($200 to $500), settlement fees ($200 to $400), discharge fees when you pay off or refinance ($150 to $400), and early repayment or break costs on fixed loans.

On a 30-year loan, a $395 annual package fee totals $11,850 — enough to offset a significantly lower interest rate. Some lenders offer genuinely fee-free loans with competitive rates, particularly online-only lenders and smaller banks. When comparing loans, calculate the total cost over your expected loan term, including all fees, not just the interest rate.

Our Mortgage Calculator lets you factor in fees to see the true cost.

In plain English: A 100% offset account is one of the most valuable home loan features available. If you maintain $50,000 in an offset account on a $500,000 loan at 6.2%, you save approximately $3,100 per year in interest — easily offsetting any annual fee.

Not all loans offer offset accounts, and some only offer partial offset (80% or 90%), which provides less benefit. Redraw facilities are more widely available and often free, but as discussed in our offset vs redraw guide, the tax implications differ significantly. When comparing loans, consider whether you will realistically maintain enough in an offset account to justify any additional cost.

If you live paycheck to paycheck with minimal savings, a basic low-rate loan without an offset may be the better choice. If you've substantial savings or receive irregular income (bonuses, commissions), an offset account can save you tens of thousands.

The ability to make extra repayments without penalty is crucial for paying off your loan faster. Most variable loans allow unlimited extra repayments, but fixed loans typically cap them at $10,000 to $20,000 per year, with penalties for exceeding the limit.

If you plan to pay off your loan aggressively, ensure your chosen loan supports this. Portability is another underrated feature — it allows you to transfer your loan to a new property when you move, without having to discharge the old loan and apply for a new one. This saves on establishment fees, discharge fees, and the hassle of a new application.

The short version: Loan portability is particularly valuable if you're likely to move within five to ten years. Not all lenders offer portability, so check before you commit, especially if you're purchasing your first home and expect to upgrade in a few years. Now you know.

To compare home loans properly, follow this process. First, determine your priorities: do you value the lowest possible rate, maximum flexibility, or specific features like an offset account?

Second, use a comparison website or mortgage broker to shortlist three to five loans that match your criteria. Third, calculate the total cost of each loan over your expected holding period (usually five to ten years, not 30, since most people refinance), including all fees, the interest rate, and the value of any features like offset. Fourth, check the lender's reputation for rate competitiveness over time — some lenders offer sharp initial rates but fail to pass on future rate cuts (known as a loyalty tax).

Fifth, consider using a mortgage broker, who can access loans from 30 or more lenders and provide personalised recommendations at no cost to you (they're paid by the lender). Our Mortgage Calculator helps you compare the total cost of different loan scenarios.