How to find the best home loan for you

Home loans come in many different shapes and sizes, which is why it’s important to ensure you choose the most suitable option for your needs.

After all, there’s no such thing as a single best home loan for everyone, as each borrower’s needs are unique to their own personal circumstances.

Luckily, there are a number of steps you can take when searching for a home loan that can help you narrow down your options and find what might work best for you.

Step 1: Calculate how much you can afford to borrow

Before you start shopping for a mortgage, or a property for that matter, you’ll need to have an idea of how much a lender may be willing to lend you.

RateCity’s borrowing power calculator allows you to enter some important details, such as your income, monthly expenses, and whether you’re buying a home to live in or as an investment, to calculate the maximum amount you could potentially borrow, expressed as an estimated range.

Step 2: Factor in additional costs

Once you’ve got an idea of how much you may be able to borrow, it’s important to factor in other costs associated with buying a house so you can budget for them along with your deposit.

You might like to start by using RateCity’s stamp duty calculator, which can tell you how much you may pay in government fees, including stamp duty, mortgage registration and transfer fees.

If you believe your deposit will be less than 20 per cent of the value of the property you wish to buy, you’ll also need to consider the cost of Lender’s Mortgage Insurance (LMI). Most lenders will require borrowers with less than a 20 per cent deposit to pay LMI, which can often add an extra few thousands of dollars to your expenses, depending on your loan to value ratio (LVR).

RateCity’s LMI calculator can give you an estimate of how much you might expect to pay in LMI fees.

Step 3: Consider your loan to value ratio

By now should have an idea of what your LVR is, which is the ratio of how much you’re borrowing with your mortgage compared to how much the property you’re purchasing is worth. Put simply, if your deposit is 20 per cent, your LVR is 80 per cent.

Knowing your LVR may allow you to narrow down your search, as most home loans will have a minimum LVR requirement.

Step 4: Weigh up your options

One of the simplest ways to compare your home loan options is to use a home loan comparison table. RateCity’s comparison tables allow you to compare advertised rates, comparison rates, fees, features and other benefits, all in one place. Simply use the filter to select the options that meet your needs.

Once you’ve got your shortlist, a quick way to estimate the cost and flexibility of a home loan before enquiring is to look at its Real Time Rating™ which is calculated as you use the site to indicate a home loan’s overall value.

Step 5: Engage a broker

If you’re looking for some expert advice before submitting an application, you might like to reach out to a mortgage broker. Mortgage brokers are industry experts who can assess your finances and make home loan recommendations based on your personal goals and financial needs. They can also help you with your application and negotiate with lenders on your behalf. 

Visit RateCity’s broker hub to learn more about what a mortgage broker could offer you.

Compare home loans in Australia