How to Compare Home Loans in Australia

Updated March 2026 · 9 min read

A home loan is likely the largest financial commitment most Australians will make. The average home loan in Australia is approximately $600,000, which means even a small difference in interest rates or fees can add up to tens of thousands of dollars over the life of the loan.

Key Factors to Compare

1. Interest Rate Type: Variable vs Fixed

A variable rate loan moves with the market. When the RBA adjusts the cash rate (or when lenders make independent changes), your rate and repayments change accordingly. Variable loans typically offer more flexibility, including offset accounts and the ability to make extra repayments without penalty.

A fixed rate loan locks in your interest rate for a set period, usually between 1 and 5 years. This provides certainty over your repayments during that period. However, breaking a fixed rate loan early can incur significant break costs. After the fixed period ends, the loan typically reverts to the lender's variable rate.

A split loan divides your borrowing into a fixed portion and a variable portion, giving you partial certainty while retaining some flexibility.

2. Comparison Rate

ASIC requires lenders to display a comparison rate alongside the advertised rate. The comparison rate factors in most fees and charges to give a more realistic annual cost. It is calculated on a $150,000 loan over 25 years. Note that the comparison rate does not account for the benefit of offset accounts or redraw facilities, so it can understate the value of feature-rich loans.

3. Offset Account

An offset account is a transaction account linked to your mortgage. Every dollar in the offset reduces the balance on which interest is calculated. For example, with a $500,000 loan and $50,000 in your offset, you only pay interest on $450,000. This effectively earns you a return equal to your home loan rate, tax-free.

Full offset accounts reduce your balance dollar for dollar. Partial offset accounts only offset a percentage. Most competitive loans offer full offset.

4. Redraw Facility

A redraw facility lets you access any extra repayments you have made above the minimum. Unlike an offset account, the extra funds are applied directly to your loan balance. Redraw may have limitations on minimum amounts or processing times.

5. Fees

Common fees include application fees (sometimes waived), ongoing monthly or annual service fees, discharge fees when you close the loan, break costs on fixed rate loans, and valuation fees. Add these up over the expected life of your loan to understand the total cost.

6. Lenders Mortgage Insurance (LMI)

If your loan-to-value ratio (LVR) exceeds 80%, meaning your deposit is less than 20% of the property value, you will usually need to pay LMI. This is a one-off cost that can range from a few thousand to tens of thousands of dollars depending on the loan size and LVR. It protects the lender, not the borrower.

Step by Step Comparison Process

1. Determine your borrowing amount, deposit size, and preferred rate type (variable, fixed, or split).
2. Use the comparison rate as your starting point to shortlist loans with similar total costs.
3. Check whether an offset account is available and whether it is a full or partial offset.
4. Add up all fees over your expected loan term to compare total cost, not just the headline rate.
5. If your LVR is above 80%, factor in LMI costs or consider saving a larger deposit.
6. Read the loan's terms on extra repayments, redraw, and portability.

Common Pitfalls

Honeymoon rates: Some lenders offer a discounted rate for the first year or two, then revert to a higher ongoing rate. Check what the rate will be after the introductory period ends.

Ignoring comparison rates: A low headline rate with high fees can cost more than a slightly higher rate with minimal fees.

Overlooking exit costs: Discharge fees and break costs (for fixed loans) can make refinancing expensive if your circumstances change.