Ever wondered why your friend, work colleague, or family member has a better home loan interest rate than you?

Here are just some of the top reasons that could affect your home loan rate.

Credit Score: Individuals with higher credit scores often qualify for lower interest rates. Lenders view them as lower-risk borrowers, leading to more favourable loan terms.

Loan-to-Value Ratio (LTV): Borrowers who have a larger deposit or more equity in their property typically receive better interest rates. Lower LTV ratios signify less risk for lenders, resulting in reduced interest rates.

Loan Size: Larger loan amounts can sometimes lead to better interest rates. Lenders may offer more competitive rates to borrowers seeking substantial loans, as these loans can generate higher profits for the lender.

Income and Stability: Borrowers with stable income and employment history may secure lower interest rates. Lenders assess income stability to gauge the borrower’s ability to repay the loan, influencing the offered interest rate.

Negotiation and Competition: Some borrowers have proactive mortgage brokers who can secure better interest rates through negotiation or by leveraging competitive offers from other lenders. Part of their offering could be continuously repricing and approaching their lender for more favourable loan terms.

So, is it all about finding the lowest rate?

While interest rates matter, Australian borrowers—whether first-time homebuyers, investors, or those refinancing—shouldn’t stop at rates alone when comparing home loans. When weighing the features and perks of different home loan options, consider which extras align best with your financial goals and situation.

The best home loan for you might not always come from the big banks. New mortgage lenders and fintech companies are entering the market, so make sure your mortgage broker is up to date with the latest offerings. These new lenders may offer tailored deals that suit your needs perfectly. It’s essential to explore all your options.

Refinancers often receive attractive incentives from banks and lenders, as they’re seen as low-risk customers with significant home equity. These perks can include cashback offers, though they typically come with equity requirements. However, before you get swayed by the allure of cash, consider if a cashback deal truly benefits you, whether you’re refinancing or not. Sometimes, the value of the cashback isn’t worth potential downsides like higher interest rates or fees. When refinancing, evaluate every aspect of a home loan to ensure you’re not inadvertently worsening your financial situation.

With more than 70% of consumers now using a mortgage broker rather than going directly to a bank, it just makes sense – more choice, more products, and an expert to guide you through the mortgage maze, which often saves you time and money.

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