Comparison Rate Schedule

 

 

When choosing a home loan, there are a number of different factors that need to be considered to ensure you choose the right loan for you.

 

While comparing interest rates is often the starting point, you also need to consider other costs such as ongoing fees, and up-front charges which add to the cost of your loan over the loan term.

 

These costs can vary between lenders and loans, so how do you make sure you are comparing like with like? By using the comparison rate.

 

What is the comparison rate?

 

The comparison rate is an indicative interest rate that combines the nominal interest rate with any foreseeable fees and charges associated with the loan, to help you obtain a more comprehensive picture of what your loan is going to cost you over the life of the loan.

 

While the comparison rate helps you to compare one loan against another on a cost basis, it’s also important to consider the features of a loan such as redraw and direct debit facilities, loan portability and repayment options that increase the flexibility of your loan and can make a huge difference to the overall cost of a loan.

 

What costs does the comparison rate include?

• Nominal interest rate
• Loan approval and any other up-front fees
• Known ongoing fees


What does it exclude?

• Government and statutory fees – as these are standard regardless of lender or loan type
• Mortgage Insurance or valuation charges if they are uncertain
• Fee waivers personal discounts that may apply to the loan.
• Fees and charges that are event-based and may or may not apply throughout the life of your loan. Eg. Redraw fees or early repayment fees

Not all home loan products are included within the Comparison Rate legislation. It only applies to fixed term products.

 

How is the comparison rate calculated?

The comparison rate is calculated in accordance with a standard formula, specified by the regulations, which takes into account;

• The amount of the loan
• The term of the loan
• The repayment frequency
• The interest rate
• Ascertainable fees and charges connected with the loan except for government charges.


What is a comparison rate schedule?

A comparison rate schedule details the various rates that apply to the lenders products at various loan amounts and various loan terms.