What is a comparison rate?
Banks and other lenders are legally required to display a comparison mortgage rates when advertising any loan. So what is a comparison mortgage rates – and more importantly, how can it help you get a better deal on your home loan?
All lenders are obliged by law to include a comparison rate when advertising a loan interest rate, but in the mortgage marketplace, comparison rates are often misunderstood amongst borrowers.
Its Apples For Apples
Essentially, a comparison rate is a way to help consumers identify the true cost of a loan,
the comparison rate is a rate that includes both the interest rate and the fees and charges relating to a loan, combined into a single percentage figure.
Most people just use the loan interest rate to compare different loans. Although this is a good start, it doesn’t take into account other costs such as establishment fees, approval fees, any upfront or ongoing fees that comprise the overall cost of a loan.”
comparison of mortgage rates are made up of the following
the amount of the loan;
the term of the loan;
the repayment frequency;
the interest rate; and
the fees and charges connected with the loan.
The loan amounts and terms shown on a comparison mortgage rate schedule don’t represent all of the possible combinations of amounts and terms.
For example, you may see a loan advertised as: Variable interest rate 4.25%, comparison rate 4.78% – based on loan of $150,000 over 25 years. While this comparison rate reflects the true cost of this example loan, it would be a completely different figure for a loan size of $400,000, or for a loan term of 30 years.
Compare Your Scenerio
In order to get the best idea of the comparison rate that applies to your loan. Type in your details into the compare loans calculator, on the Hero BroKer website to compare & find the loan thats best for you.