Understanding Comparison Rates: How to Find the Best Home Loan Deal
Why Comparison Rates Matter
When searching for the best mortgage deal, you might come across an ad claiming “3.6% INTEREST!”, only to find a “7.8% comparison rate” listed below. What does this mean?
A comparison rate is designed to help buyers see the true cost of a home loan, factoring in fees, charges, and loan features. While a lender may promote a low interest rate, hidden fees could make another loan more affordable overall.
How Comparison Rates Improve Transparency
The History Behind Comparison Rates
In 2003, an amendment to the Uniform Consumer Credit Code (UCCC) required lenders to include comparison rates in advertising to prevent misleading interest rate claims.
📌 Today, the National Credit Code still mandates comparison rate disclosures, ensuring borrowers can make better financial decisions.
Comparing Loans the Right Way
Rather than simply choosing a low-interest loan, the comparison rate helps buyers see which mortgage actually costs less over time.
Example:
- Loan A – 3.6% interest rate but high fees
- Loan B – 3.9% interest rate but no fees
Even though Loan A seems cheaper, Loan B might have a lower comparison rate, making it the better financial choice.
How to Interpret Comparison Rates
Loan Amount & Term Matter
Comparison rates are based on a sample loan size and term.
💡 Example: Most ads calculate comparison rates on a $150,000 loan over 25 years.
However, if your loan is $900,000, your actual comparison rate will vary significantly.
🔎 To get an accurate comparison rate, look for loans closest to your intended amount and term.
Get Expert Help to Find the Best Mortgage
Why Work with a Mortgage Broker?
At CBM Mortgages, we help homebuyers:
✅ Compare real loan costs beyond advertised interest rates
✅ Find the best mortgage deal for their financial situation
✅ Avoid hidden fees and surprises
📞 Contact us today for a personalised comparison rate analysis!
Read our blog on different types of home loans here or a Fixed rate blog post here
📩 Email: cr***@**********es.com
Disclaimer
This article provides general information only and does not constitute financial advice. Always consult a qualified financial advisor or mortgage broker to assess your personal situation before making any financial decisions.
Written by Craig McDonald 14/04/2025
