Two loans can advertise very different headline rates and still cost roughly the same, or a loan with the “cheaper” rate up front can cost more overall once you factor in fees, how long a discounted rate lasts, and what it reverts to afterwards.
This calculator lets you enter two loan options side by side, upfront and ongoing fees, repayment frequency, and separate introductory and ongoing rates, against the same loan amount and term, so you can see which one actually saves you money rather than which one just looks cheaper.
This calculator provides general information only and doesn’t constitute financial advice. Loan pricing changes regularly and varies by lender, so always confirm current rates and fees directly with the lender.
Here’s a common scenario this calculator is built for. Say you’re comparing two loans, both for $500,000 over 30 years, monthly repayments. Loan A has an introductory “honeymoon” rate of 5.49% p.a. for the first 12 months, reverting to an ongoing variable rate of 6.79% p.a.. Loan B has a flat variable rate of 5.99% p.a. for the life of the loan, no introductory period, no step-up.
At first glance, Loan A looks like the better deal, its headline rate is 0.5 percentage points lower. Here’s what actually happens:
Even though Loan A starts $158 a month cheaper, its repayment jumps by about $411 a month, roughly 14.5%, the moment the honeymoon period ends. Over the first five years, Loan A ends up costing around $10,261 more than Loan B, because the higher ongoing rate outweighs 12 months of a lower rate. Run that gap out over the full 30-year term at the same rates, and Loan A costs roughly $86,000 more in total.
This is why the ongoing rate, not the introductory rate, usually matters more for total cost, unless you’re confident you’ll refinance away before the honeymoon period ends. If you are planning to refinance at the 12-month mark, the honeymoon rate can genuinely work in your favour; the risk is simply forgetting to act before it reverts.
Figures are illustrative and rounded, and assume both rates stay unchanged for the periods shown, which real variable rates won’t necessarily do, use the calculator above with the actual rates and fees you’re being offered.
Most home loans in Australia follow a broadly similar sequence, though the order and detail vary by lender:
- Get pre-approval, an indication of how much a lender might lend you, useful when house-hunting, though not a guarantee, since final approval still depends on the property and your circumstances when you formally apply.
- Find a property and make an offer, ideally subject to finance.
- Pay your deposit, typically negotiated as part of the sale contract, budget for stamp duty and other settlement costs on top of it.
- Apply for the home loan formally, submitting income, expense and identification documents.
- Lender valuation, the lender values the property independently to confirm it supports the loan amount.
- Sign loan documents and proceed to settlement, at which point the loan funds and the property becomes yours.
- Variable rate, moves up or down with the lender’s settings, influenced by (but not identical to) the RBA cash rate. Repayments can rise or fall, and variable loans typically offer more flexibility around extra repayments and offset accounts.
- Fixed rate, locks in a set rate for a defined period, commonly one to five years. Repayments stay predictable, but fixed loans usually limit extra repayments and can carry break costs if you exit or refinance early.
- Split, divides the balance between a fixed portion and a variable portion, giving some certainty while keeping flexibility on the rest.
- Interest-only, repayments cover interest only, usually for a set period, before reverting to principal and interest. Can suit investors seeking short-term cash flow, but builds no equity through repayments during that period and costs more overall.
- Principal and interest (P&I), the standard structure most Australians use: repayments reduce both principal and interest from the outset. It applies whether you’re buying a home to live in (owner-occupier) or an investment property, though owner-occupier loans are typically priced a little lower, since lenders treat owner-occupied lending as lower risk. If you’re buying a home to live in, P&I is almost always the default and lowest-cost structure.
Beyond these structures, one rate type deserves its own mention: the introductory (“honeymoon”) rate, a discounted rate for an initial period, usually 6–24 months, that then reverts to a higher ongoing rate. As the worked example above shows, the ongoing rate matters more than the honeymoon rate for anyone planning to hold the loan long-term.
Refinancing means replacing your current home loan with a new one, either with your existing lender or a different one. Common reasons include chasing a lower rate, accessing equity, consolidating debt, or switching to a loan with features you need, like an offset account. It usually involves some fees, discharge fees on the old loan, application or valuation fees on the new one, so check the savings outweigh the switching cost before proceeding. This calculator’s side-by-side comparison is a useful first step for that decision.
Lenders assess borrowing capacity against factors including whether you’re a single applicant or a couple, number of dependants, whether the property is for owner-occupation or investment, your income (including any variable or investment income), living costs and existing commitments, and any existing loans or credit facilities including card limits.
Because these factors interact, the same income can produce quite different borrowing capacity depending on expenses and existing debts. Our Borrowing Power Calculator is the right tool for estimating this, this calculator focuses on comparing two loan options once you have a loan amount in mind.
Once you’ve settled on a loan amount and structure, use the Principal & Interest Home Loan Repayment Calculator to see your repayment and how the interest-versus-principal split shifts over the loan term. If you’re weighing an interest-only period, model that against equivalent P&I repayments to compare short-term cash flow against long-term total cost.
LMI protects the lender, not you, if you default on a loan with a smaller deposit, typically required once you’re borrowing more than 80% of the property’s value. The cost depends on loan size and deposit size: a larger loan and a smaller deposit both push the premium up. LMI can be paid upfront or, with many lenders, added to the loan amount and repaid over the term (meaning you’ll pay interest on it too), worth including in any like-for-like loan comparison, since it can differ between lenders at the same LVR.
Most Australian home loans run for a standard term of 25 to 30 years. A small number of lenders, including several credit unions and mutual banks, plus at least one bank product, now offer terms extending to 40 years, though this remains uncommon rather than standard across the market (Canstar).
A longer term reduces your minimum monthly repayment, helping short-term affordability, but means paying interest for longer, extending a given loan from 30 to 40 years can add well over $100,000 in total interest, depending on the rate. If affordability is the concern, compare a longer term against other options, like a smaller loan amount or a different property price point, rather than assuming a longer term is automatically the right fix.
What’s the difference between the introductory rate and the ongoing rate? The introductory (“honeymoon”) rate is discounted for a set initial period, commonly 6–24 months, before reverting to the lender’s ongoing rate, often higher than competing flat-rate loans, as the worked example above shows.
Is a lower rate always the better loan? Not necessarily. Fees, the length of any introductory period, the ongoing rate after it, and features like offset accounts all affect total cost. The comparison rate (and, for introductory-rate loans, the blended cost across the whole term) gives a fuller picture than the headline rate alone.
How much deposit do I need to avoid Lenders Mortgage Insurance? Generally at least 20% of the property’s value, since LMI is typically triggered once you’re borrowing more than 80%. The premium below that depends on loan size and deposit size.
Should I choose a fixed or variable rate? Depends on your priorities. Fixed offers certainty but usually limits extra repayments; variable moves with the market but generally allows more flexibility, including offset accounts. A split loan is a middle option worth considering.
Is refinancing worth the fees involved? It can be, if the rate difference is large enough or you need features your current loan lacks. Add up discharge, application and valuation fees, and compare against repayment savings over a realistic horizon, say, two to three years.
Can I really get a 40-year home loan? Yes, from a small number of lenders, though it’s not the market standard, most cap terms at 25 to 30 years. A 40-year term lowers minimum repayments but increases total interest substantially.
