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What is a home loan offer?

Lenders often promote different types of home loan offers as an incentive to get new customers onto their books. A home loan offer might come in the form of a cash back deal, a reward points bonus or something else of value to the borrower.

When selecting your home loan, it’s important to consider what features and benefits are available. As well as comparing the interest rates and fees, it’s worth looking at what special deals and introductory offers may be available with different home loan products.

As with any credit product, it’s also important to know your loan term and the different repayment types available. Before committing to a home loan product, it could be a good idea to read through the product disclosure statement.

What types of home loan offers are there?

Whether you’re an owner-occupier or an investor, the types of home loan offers that may be advertised by your lender include:

  • Cashback deals
  • Discounted interest rates
  • Reward points
  • Waived fees
  • Special features

What's new in cashback home loan offers this month?

Aussie borrowers may have witnessed the end of the rock-bottom fixed interest rate era, as more lenders begin to lift fixed mortgage rates. Earlier this month, the last 4-year fixed rate below 2 per cent was hiked, whereas in January this year there were 32 4-year fixed rates.  

And if interest rates are potentially on the rise, borrowers may need to look elsewhere to add value to their home loans. If your fixed rate period is coming to an end and you’re considering refinancing, or if you’re looking to nab your first home loan, it may be worth looking at what cashback offers are available. 

This month, there are currently 24 home loan lenders offering cashback deals to customers ranging from $1,000-$5,000, depending on the size of the mortgage (data accurate as of 24.06.2021).

 There has also been an increase in cashback offers for first home buyers, up from 1 to 5 deals now on the table. Australian Military Bank is also offering up to $1,000 for investors only, and Police Bank is offering $1,500 - $2,000 for owner-occupier refinancers only. The majority of cashback offers are still reserved for refinancers.

Some of these cashback offers include:

  • Westpac cashback offer - $3,000

Enjoy up to $3,000 refinance cashback for new owner-occupier and investment home loans. $2,000 per property you refinance and a bonus $1,000 for your first application.

  • NAB cashback offer - $2,000

$2,000 cashback when you refinance a loan of $250,000 or more.

  • HSBC cashback offer - $3,288

$3,288 cashback available for refinancers. Refinancers must apply between 1 June 2021 and 31 July 2021, with loan settled by 30 September 2021. Min refinance amount $250,000.

For more information on home loan cash back deals for June 2021, please read our guide.

Cashback deals

Some mortgage lenders offer to reward new customers with a fat stack of cash, to use however you like. Cashback rewards on new home loans can often get you a couple of thousand dollars in your bank account. It’s also common for banks to offer refinance cashback perks to attract new customers already with other lenders.

Cashback deals can be valuable under the right circumstances. Buying a home or investment property often involves paying a range of fees, charges and taxes such as stamp duty, which can leave your savings rather drained. Plus, you may also have moving costs or renovation expenses to consider. Having a couple of thousand extra dollars available can provide some extra budget relief, allowing you to keep your life on track after your major purchase.

Keep in mind that in some cases, the money you’d receive from a cashback offer may not provide as much value as the long-term savings you’d enjoy by taking out another loan with a lower interest rate or less fees. It could be a good idea to calculate the costs of different loans, compare the value of any rewards with the savings you could enjoy, and make a decision based on what you think may be best for you.

Given the competitive home loan market, it might also be worthwhile weighing up the cashback perks offered by different banks, though it isn’t advised to base your home loan decision solely on this.

Discounted interest rates

Some banks and mortgage lenders offer to reduce the rate of interest charged on your home loan, either as a permanent discount over the life of your loan, or as a temporary reduction during your loan’s introductory “honeymoon” period.

Interest rate discounts can make a big difference to the cost of your mortgage. Lower loan repayments can take the pressure off your budget, so you can spend your money on something else. Alternatively, if you can afford to make additional repayments onto your home loan, you can a make a valuable head start on shrinking your mortgage principal and reducing your future interest repayments. This could get you closer to paying off your property ahead of schedule.

However, it’s important to remember that no honeymoon lasts forever. Once your home loan’s introductory period expires, your discounted interest rate will revert back to the lender’s standard variable rate. This can be a shock to your budget if you’re not careful, and could leave you struggling to afford your new repayments. Consider finding out when your loan will revert, what the revert rate will be, and how your monthly repayments will be affected. Then plan your budget accordingly.

Fixed rate home loans vs variable rate home loans

Fixing your home loan interest rate can be a lot like getting a discounted introductory rate offer. By locking in the interest rate on your home loan for a few years, you can keep your home loan repayments consistent for a limited time, for much simpler budgeting.

However, fixed interest rates aren’t always lower than variable interest rates, which may increase or decrease over time. It’s possible to find yourself stuck on a higher fixed rate while other variable rate customers are enjoying interest savings and lower loan repayments from discounted rates.

Just like other introductory rate offers, it’s a good idea to check what variable interest rate your home loan will revert to once your fixed interest period ends, and budget your monthly repayments accordingly to make sure you’re not caught off-guard.

With heated competition between the banks, it could also be worth shopping around for different fixed interest rates and variable rates across different lenders. Take note that the lowest interest rate may not always indicate the cheapest deal, as fees and charges, such as application fees, also come into play.

Reward points

Several banks and mortgage lenders have partnerships with major airlines, allowing you to earn reward points by using financial products such as credit cards. These points can be redeemed for plane tickets and seat upgrades, as well as travel experiences and a variety of other products and services from the rewards program.

These partnerships sometimes extend to home loans, where signing up for a mortgage can earn you a one-time reward of bonus points, similar to a cashback deal. Some loans even offer reward points for making mortgage payments, so paying your mortgage can bring you closer to taking a holiday or enjoying other rewards.

Much like cashback offers, it’s often worth comparing the value of the reward points you could receive to the loan’s cost. Sometimes, a simpler “no frills” loan with a low rate and fees can offer greater value than one that offers frequent flyer rewards. Also, it’s often worth checking the terms and conditions of the rewards program linked to the offer – if you’re unlikely to use your points before they expire, for example, you may not get much value out of them.

Waived fees

Taking out a home loan often means paying an establishment or application fee, covering the administration costs of setting up your loan. However, some banks offer to waive this fee or other upfront expenses to help ease your financial pressure.

Some home loan products also charge ongoing fees, paid monthly or annually, to help cover the cost of maintaining your mortgage. Depending on your loan type, some lenders may offer to waive these ongoing mortgage fees for selected customers, mostly for a set period or, less commonly, over the life of the loan.

As always, consider looking at the home loan’s other features, benefits and costs to work out the overall value of the fee waivers before you sign on the dotted line.

Note that if your home loan qualifies for a fee waiver, you may get a different comparison rate from the one listed. You may want to double check and see how this might affect how it compares with the other home loan products you were considering.

What about low deposit home loans?

Some lenders offer home loans where you can apply with a deposit of less than the customary 20 per cent of the property value. This means you can spend less time saving a deposit and enter the property market sooner.

While it’s possible to get a home loan with a 10 or five per cent deposit, this typically also means covering the cost of a lender’s mortgage insurance (LMI) policy, which covers your lender (and not you) against the risk that you’ll default on the mortgage. Generally, the lower your deposit, the higher the cost of LMI, which could be thousands or tens of thousands of dollars. Some lenders may offer to reduce this cost for selected borrowers (such as first home buyers or other new owner occupiers), but it’s still a significant expense to consider. Most lenders will have rules around the maximum LVR (loan to value ratio) a borrower can have, so it’s important to take note of this before applying.

If you can find a home loan that offers a guarantor option, it may be possible to apply for a mortgage with a low deposit, or even no deposit at all. A guarantor is a relative that offers to secure your mortgage deposit with the value of their own home, and agrees to take responsibility if you can’t pay your home loan. It’s a big ask, so make sure you and your guarantor know the risks involved before agreeing to the arrangement.

Special features

A home loan that offers the right features and benefits for your needs can provide just as much value as a special deal. For example:

  • Extra repayments directly reduce the principal you owe on your mortgage. This can reduce your future interest charges, and bring you closer to paying off the property and exiting the loan early.
  • A redraw facility can be used to withdraw any additional repayments you’ve made on a home loan, and put them back in your pocket. This can let you put your spare savings onto your mortgage to help reduce your interest repayments, while still being able to access this money if a sudden expense comes up.
  • An offset account is a savings or transaction account attached to your home loan, where you can deposit or withdraw money as often as you like. Money in your offset account is included when calculating interest on your loan amount, meaning you may pay less in interest repayments. For example, if you have a $300,000 home loan, and an offset account with $10,000 saved, you’ll be charged interest as if you only owed $290,000 on your mortgage.

Keep in mind that the more features and benefits that are included in a home loan offer, the more it may cost. Check the interest rates and fees, and consider whether a cheaper “no frills” home loan could provide you with a more competitive offer.

What are the terms and conditions?

Many special offers on home loans require you to meet certain eligibility criteria, on top of the standard lending criteria. For example, a home loan with a discounted interest rate may only be available to borrowers taking out a new loan as an owner occupier, paying principal & interest, with a deposit of at least 20 per cent or a maximum LVR of 80 per cent. If you hold an investment loan, or want to pay interest-only, you may not be eligible for some offers.

Alternatively, you may be able to enjoy a lower rate on your home loan if you bundle the mortgage offer with other financial products from the same bank, such as a transaction account and a credit card. This could also get you a better deal on these products, though you may need to pay an annual package fee in some cases.

Before you make a home loan application based on its special offers and rewards, make sure that it’s a home loan that will suit your financial situation, and that you can fulfil the requirements to enjoy the most value from the rewards on offer.

Fact Check Verification

The information on this page was fact checked by Mahesh Perera, a broker in Queensland specialising in home loans, car financing, personal loans, debt consolidation, and asset financing. For more information on how brokers like this can assist you, look for a broker near you

Frequently asked questions

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

Is the lowest home loan rate always the cheapest?

The home loan with the lowest interest rate may not always be the cheapest mortgage option for you. Sometimes a home loan with a low interest rate may charge high fees, which may cost more in total than a mortgage with a higher interest rate and no fees.

Consider checking the comparison rate, which combines interest and standard fees, to get a better idea of the overall cost of different home loan options.

How do you find cheap home loans?

With so many interest rate options and repayment types available, finding the cheapest home loan may depend on the type of loan you choose.

Whether you’re looking for an owner-occupier or investor loan, with interest-only or principal and interest repayments, on a fixed or variable interest rate, the cheapest home loan rate available may vary greatly.

One way to find the cheapest option for you is to narrow down your search and compare the options that best suit your individual requirements. RateCity’s home loan comparison tables can help you get started on your search and take the hassle out of shopping around.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

Are fixed rates or variable rates cheaper?

Fixed and variable home loan interest rates are discretionary based on the lender’s decision. They will also be influenced by the Australian economy, as well as the Reserve Bank of Australia’s cash rate. The specific interest rate you may be offered will also depend on your credit history and financial situation.

Whether a fixed or variable rate home loan is the cheaper option for you will depend on all the above, and may still fluctuate over a 25-year home loan term. Therefore, it’s worth comparing your loan options with our comparison tables to see how the rates compare, based on your specific financial needs.

Can I get a home renovation loan with bad credit?

If you're looking for funds to pay for repairs or renovations to your home, but you have a low credit score, you need to carefully consider your options. If you already have a mortgage, a good starting point is to check whether you can redraw money from that. You could also consider applying for a new home loan. 

Before taking out a new loan, it’s good to note that lenders are likely to charge higher interest rates on home repair loans for bad credit customers. Alternatively, they may be willing to lend you a smaller amount than a standard loan. You may also face some challenges with getting your home renovation loan application approved. If you do run into trouble, you can speak to your lender and ask whether they would be willing to approve your application if you have a guarantor or co-signer. You should also explain the reasons behind your bad credit rating and the steps that you’re taking to improve it. 

Consulting a financial advisor or mortgage broker can help you understand your options and make the right choice.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.