Home Loans – Understand The Comparison Rate To Save Money
When you start looking for a home loan, what is the single most important facet? I would assume you, like anyone else, would look at the headline rate that is likely the biggest and most prominent piece of advertising on the page. The huge 6.23% that seems lower than every other loan you have ever seen.
Well if you sign up for a home loan based on this rate, you have already failed the money savers test.
Headline rates are exactly that – they are there to grab your attention.
They aren’t a true reflection of neither the ongoing rate nor the actual rate you will be charged once all fees and charges are included each month.
Look instead for the comparison rate.
What is the comparison rate?
It is a legislated requirement enforced by state government throughout Australia. The comparison rate is the full cost of your loan each month with all fees and charges included.
It is possible to have a great interest rate with lots of fees and charges that effectively makes the interest rate get pulled back up to an average one.
In the past many lenders have made this rate quite small in order to conceal the true rate. Though word has it that ASIC is starting to crack down on this and making all lenders display the comparison rate with equal prominence.
Did this tip help you? Why not try and educate others about the comparison rate trick. It is simple but you would be surprised how many people miss it.
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