MyRate Education Centre
Comparison Rates
When considering the interest rate of a home loan, also look at the Comparison Rate. All lenders are required by law to display a comparison rate along side their advertised interest rate.
Comparison rates are calculated using a formula that takes into account:
- the interest rate of the loan
- all fees and charges related to the loan that a borrower must pay under the loan contract – eg. establishment fees, valuation fees and ongoing fees.
- the amount borrowed
- the term of the loan
- the repayment frequency
Comparison rates do not take into consideration:
- government charges
- fees and charges which may or may not be charged (eg: early repayment & redraw fees)
- fees and charges which cannot be determined at the time the comparison rate is made available.
Tip:
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Beware of honeymoon, introductory or low interest rates with high comparison rates, all of which are referred to as teaser rates and are usually used as marketing tools by the lender.
These loans can be accompanied by higher fees, restrictions on repayments, and / or a higher interest rate following the introductory period. When you factor in the restrictions, add up the fees and interest over the term of the loan, the cost will more than likely exceed other products on the market such as the MyRate Advantage Loan which has an always low standard variable rate and no fees.
The comparison rate on our Advantage Rate Loan is exactly the same as the interest rate because we do not charge any fees on standard applications. |
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