If I have a home loan with honeymoon interest, will the comparison rate include the revert rate?

Yes – comparison rates do include revert interest wherever applicable. Honeymoon rates , or introductory rates, are common on home loans and can help borrowers save in the opening 12 to 24 months of their loan. However, the revert rate is a relevant consideration, as these may be less competitive when compared to other loans. Comparison rates will account for this in their calculations.

Will my credit score impact my comparison rate?

It may – because home loans are a type of finance which uses a high-value, sellable asset as collateral, your credit score generally isn’t a major factor for your lender when assessing your application. However, if you do have a bad credit score and recent defaults which may be cause for concern for your lender (or have recently been bankrupt), they’ll either increase your rate and charge more fees to compensate for the increased risk or simply reject your application outright.

Will my payment frequency affect my mortgage’s comparison rate?

Yes – more frequent repayments will result in a decrease in the overall cost of interest on your mortgage. This is because interest is calculated daily, meaning the faster your loan debt falls, the faster the interest you’re charged will decrease in equal measure. For instance, a $500,000 home loan repaid over 30 years at 3% p.a. comparison would cost almost $35,000 less when paid on a fortnightly basis compared to monthly.

Are comparison rates on other loan types calculated in the same way?

Yes – comparison rate is the term used for any loan repaid with interest and fees as a way for consumers to compare their overall cost more accurately. A car loan, for example, will always have a comparison rate which accounts for its interest rate and the various fees which are charged on the deal. Other loans’ comparison rates are also calculated based on a consistent metric, so you should always ensure you know what this is before diving into the application process, as you may find your rate is higher than what was indicated.

Will additional loan features increase my comparison rate?

They may – some lenders charge a small premium for features such as offset accounts and redraw facilities, which is usually represented as a fraction of its percentage. However, the potential for savings with these features is often far greater than what they may cost in interest, so it’s almost always worth securing a home loan with useful additional features.

Do larger loans come with lower comparison rates?

They can – because larger loan debts will naturally accrue more interest, some lenders will offer discounts for mortgages which fall in their overall price range. They’re willing to do so due to the fact that even with a reduced rate, they’ll still earn more interest from the borrower than they would on a smaller loan. This is why your comparison rate may be lower on a greater loan sum, so you should bear that in mind when approaching the comparison process.