When you’re staring at a row of home loan offers, the advertised interest rate grabs your attention first—and for good reason. Even a 0.5% difference can add up to thousands over the life of a loan. But the rate alone rarely tells the full story. A loan with a sparkling headline rate might turn out to be more expensive once you factor in fees and forgone flexibility, while a slightly higher rate paired with the right features could leave you better off.
To compare properly, start by lining up the comparison rate. Unlike the basic interest rate, the comparison rate is a single percentage figure that bundles the interest rate with most upfront and ongoing fees. It’s designed to give you a truer sense of a loan’s annual cost and is particularly useful when you’re shortlisting offers from different lenders.
Next, look at fees—both the one-off application (or establishment) fee and any monthly or annual service fees. Two loans with identical interest rates can have very different total costs if one charges a hefty annual fee. The comparison rate should capture the common ones, but it pays to check exactly what’s included and whether there are extra charges for redraws, early repayment, or switching.
Then come the features. An offset account can reduce the interest you pay by effectively lowering the balance the interest is calculated against. If you have a $500,000 loan with $20,000 sitting in a linked offset account, you only pay interest on $480,000. That sounds great, but if your offset balance will be small or you rarely hold much in your transaction account, the benefit may not outweigh the extra package fee that often comes with it.
A redraw facility lets you pull out any extra repayments you’ve made, which can be useful if you plan to park spare cash in the loan but want to keep it accessible. However, some lenders charge a fee each time you redraw, so ask how many free redraws you get and what the cost is beyond that.
Beyond offset and redraw, think about how you plan to run the mortgage. If you want certainty over repayments, a fixed rate might suit you, but you may lose the ability to make extra payments or refinance without a break fee. A variable rate loan typically gives you more flexibility and features, though your repayments can move with the market. If you’re torn, a split (partially fixed) loan lets you have a foot in both camps.
A sensible way to compare
Pick two or three lenders and ask for a personalised quote that spells out:
- The interest rate and the comparison rate
- The application fee and any ongoing monthly or annual fees
- Whether an offset account is included or costs extra
- Any fees to redraw money or make additional repayments
- The loan term and the repayment size
Then use a mortgage calculator to model what the repayments and total interest look like across different scenarios—especially with a 2% rate rise factored in. Seeing the numbers side by side for each loan can make it much easier to spot which features are genuinely worth the price tag.
Keep in mind that comparison websites can be helpful, but they may not show every offer on the market and often earn money through promoted links. Treat them as a starting point rather than the full picture.
Finally, be honest about what you’ll use. If an offset account or redraw sounds appealing but you know your savings won’t stretch that far, a basic loan with a lower rate and fewer features might leave more cash in your pocket. The best loan isn’t the one with the longest list of bells and whistles—it’s the one that matches the way you actually manage money while keeping costs down.
LoanOffer is an educational comparison resource. We do not lend, arrange loans, or provide personal financial advice. Loan approval, rates, and savings outcomes are never guaranteed and depend on your circumstances and the lender’s criteria.