How do I score the best home loan deal?

How to Score the Best Home Loan Deal (And Save Tens of Thousands)

Most Aussies assume they've got a good home loan deal — until they find out they're leaving tens of thousands of dollars on the table. A small difference of just 0.15% p.a. in rates and $100 extra in annual costs on a million-dollar home loan for 30 years translates into more than $37,500 in additional cost. Truly, this is one area where "good enough" is not good enough.

Finding the best home loan isn't just about spotting the lowest advertised interest rate. A borrower needs to understand comparison rates, all the fees, cashback offers, and varying loan features to truly understand the full cost of a loan. It's no wonder that many homeowners settle for less-than-optimal deals.

At Homerun, we believe the system should work better for borrowers — not just banks and brokers. Here's how you can secure a truly great home loan deal that could save you significant money over the life of your loan.

What Does a 'Great Home Loan Deal' Actually Mean?

The "best deal" isn't just about the interest rate you see in advertisements. It's about the lowest total cost that meets your specific needs. That means factoring in:

• Essential features that match your financial situation
• Upfront and ongoing fees
• Available rebates and cashback offers
• Interest charges (both fixed and variable periods)

Example: A loan with a 5.85% interest rate but no annual fee might actually cost less over time than a 5.75% loan with a $395 annual package fee, especially for smaller loan amounts. Many borrowers focus solely on the rate and miss these critical details.

Why Most People Don't End Up With the Best Deal

Did you know that over 60% of homeowners stay with their existing lender out of convenience? This "loyalty" often comes with a hidden tax – long-term customers frequently pay higher rates than new customers.[RL1] 

Other common pitfalls include:

• Limited comparison: While there are over 80 lenders active in Australia, most brokers only show options from a fraction of these lenders. Not all lenders pay commission to brokers. Brokers typically exclude lenders that don't pay commission and even within that limited subset they show products from lenders they are accredited with. Hence, a typical 1-2 person broker shop will show options from 10-15 lenders, or a bigger brokerage might show options from 20-25 lenders. However, this is still a small fraction (<35%) of the market. Comparison sites are similarly constrained. While they generally show offers from a slightly wider pool, they will generally only display options where the lenders/broker pays them (advertising fees - or commissions - or both). Typically, you'll be drawn in by seemingly attractive low interest rates, only to discover later that you don't qualify or there's an undisclosed condition. This tactic aims to remove you from comparison shopping and lock you into their process.
• Misleading comparison rates: Comparison rates are calculated based on a $150,000 loan over 25 years, which doesn't reflect most current mortgages that are typically much larger (often $800,000+) and for longer (30 years). They only incorporate "ascertainable" fees like application fees and ongoing service fees, but exclude situation-specific costs like early repayment fees, redraw fees, or break costs. Additional benefits or features of a loan package (like offset accounts, redraw facilities, or linked credit cards) aren't factored into the comparison rate, despite potentially offering significant value.
• Decision fatigue: Securing a home loan is a complicated and often daunting process. Initially, consumers prioritize finding the 'best' or 'lowest' interest rate. However, our research revealed that as people progress through the home loan journey, rate importance diminishes for some borrowers, who become increasingly influenced by other factors like the convenience of remaining with their current lender. Most consumers evaluated only a few options. The overwhelming number of options leads many to simply choose the first "good enough" option. While many who compared multiple loans made decisions based on specific criteria (such as lowest interest rate, minimal fees, or offset account availability), very few conducted systematic comparisons or calculated which loan would prove most economical for them over the long term.

The Smart Way to Find the Best Deal

Step 1: Understand Your Borrowing Objective

Most borrowers fall into one of three categories:

• Seeking the lowest possible cost (above all else)
• Needing to maximize borrowing capacity
• Wanting quick approval with low financial scrutiny

Typically, there is a trade-off between these three objectives. The lowest-cost product may not allow you to maximize borrowing capacity or might involve a level of financial scrutiny you're uncomfortable with. Knowing your primary objective helps narrow your focus to lenders who specialize in meeting that need.

Step 2: Know Your Numbers

Before shopping around, get clear on:

• Your loan amount
• Loan-to-value ratio (LVR)
• Credit profile (score and history)
• Income and expenses

These factors dramatically affect what rates and products you'll qualify for.

Step 3: Identify Must-Have Loan Features

Not all loans are created equal. Consider which features matter most to you:

• Variable rate loans or Fixed-rate loans
• Principal & Interest Loans vs. Interest Only repayments Loans
• Offset account or redraw facility
• Package deals with linked credit cards or transaction accounts

Remember, each feature typically impacts the total cost of your loan. For example, a loan product with an offset will generally cost about 0.1% (about $20K for a million-dollar loan for 30 years) more than a loan product without it. This feature only saves money if you have enough savings to park in it. Alternatively, could you just use a redraw facility, which is less convenient than an offset account, but doesn't typically cost anything additionally?

Step 4: Compare Widely (But Wisely)

For a thorough comparison, consult:

• At least two mortgage brokers
• Two different comparison websites

Always keep your primary objective from Step 1 in mind when evaluating options. Remember there is no such thing as a universal best rate. The best rate for what you need will be different than the best rate for your friend.

Step 5: Consider a Specialized Service

Alternatively, use a service like Homerun that does the heavy lifting for you. We scan a broader pool of lenders (80+), factor in all fees and rebates, and provide a true "total cost" analysis tailored to your specific situation.

Plus, we're so confident in our ability to find you the best deal that we offer a unique promise: If you find a loan with a lower total cost that meets all your needs, we'll either find you a comparable option or give you a $250 gift card.

Bonus Savings Tip: Don't Ignore Cashback and Fee Waivers

Some of the best savings' opportunities come from:

• Refinance cashback offers (often $2,000-$4,000)
• Rebates from broker commissions
• Waived application fees
• Discounted LMI (Lenders Mortgage Insurance)

Example: A $2,000 cashback offer on a $500,000 loan is equivalent to about a 0.10% rate discount in the first year. For many borrowers, this upfront saving outweighs a slightly lower ongoing rate.

The Application Process: Setting Yourself Up for Success

To avoid delays and rejections:

• Prepare comprehensive documentation: Recent pay slips, tax returns, bank statements, ID documents, and proof of assets and liabilities
• Clean up your finances: Minimize discretionary spending for 3-6 months before applying
• Allow sufficient time: The typical approval process takes 2-6 weeks

Common reasons for rejection include undisclosed debts, inconsistent income documentation, and recent credit inquiries that cannot be explained.

With Homerun, we streamline this process using open banking tools that reduce the effort required to download, collate, and analyse documents – making approval faster and less stressful.

Final Tip: Review Regularly — Not Just Once

Home loans aren't set-and-forget products. The deal you get today might not be the best in 12 months. The competitive landscape changes constantly, with new products entering the market and rates shifting with economic conditions.

Most lenders count on customer inertia, offering their best rates to new customers while existing customers pay more. That's why regularly reviewing your loan (at least annually) is essential.

Homerun customers receive ongoing monitoring of their rate competitiveness, with alerts when it's financially worthwhile to consider switching – ensuring you're never paying more than you should.

It's Easier Than You Think

Finding the best home loan deal doesn't have to be overwhelming. By understanding the true cost of a loan (beyond just the interest rate), comparing options strategically, and staying informed about market changes, you can secure a deal that saves you tens of thousands over the life of your loan.

👉 Get started now with Homerun; it's quick, doesn't cost you, and could save you tens of thousands of dollars on your home loan.

‍Homerun's commitment: We will find you a home loan with a lower total cost than anything you can find that meets your needs. For loan applications with a net balance of $700,000 or more, if you find a better deal, we'll either match it or give you a $1,000 gift card. See our website for full terms and conditions.

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