What is a comparison rate?

A comparison rate merges interest and fees to show a loan's true cost.

The comparison rate is a tool that helps you identify the true costs of different home loans.  It takes into account the interest rate charged on the loan as well as certain fees and charges that may apply.

How does it help you?

By using the comparison rate, borrowers can more easily see which loan option offers the best overall value, rather than just the lowest interest rate. Be aware though that comparison rates do not include all fees and charges and our calculated using prescribed loan amounts.

In Australia, it is mandatory for lenders to display the comparison rate as well as the basis for how it was calculated alongside the advertised interest rate for any home loan product.  This allows borrowers to compare the costs of different loans and help them make a more informed decision about which one is right for them more easily.

How is a comparison rate calculated?

The formula for calculating the comparison rate is regulated by the Consumer Credit Code and all lenders use the same formula.

The loan's interest rate, as well as some of the initial costs, ongoing costs, and other charges, are taken into account by this formula. The comparison rate is calculated on a loan value of $150,000 over a 25-year term, so it’s important to consider how your circumstances may affect this.

For example, if you had a much higher loan value then interest would be likely to make more of an impact on how much you repay rather than fees.  Alternatively, if you had a very small loan amount or a short term, fees would proportionally make up more of your repayments.

If you're looking to switch to low variable rates, that have an in-built discount every year (up to 30 years) you can switch to Unloan.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000.

^ Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. This discount is applied to each loan that you have with Unloan. If you have multiple loans (e.g. one investor and one live-in loan), they will each have a discount calculated based on when you settled each loan. Unloan may withdraw this discount at any time.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.

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Calculations are not a loan approval. Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions will be set out in our loan offer, if an offer is made.

^Rates shown are inclusive of a 0.01% p.a. discount off our reference rate. On each anniversary of your loan’s settlement date, you will receive an additional discount of 0.01% per annum, up to a maximum discount of 0.30% per annum. For purchase loans with a Loan to Value Ratio (LVR) between 80.01% - 90% LVR, a lenders mortgage insurance (LMI) premium and higher interest rate apply. In some cases depending on the property’s location or type, LMI may also be required for LVR between 70.01% and 80%.

*Comparison rate is calculated on a $150,000 secured loan over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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