A loan comparison turns a list of advertised rates and fees into a single answer: which loan costs less over your loan's life? The legal "comparison rate" gives you part of that answer based on a generic $150k / 25-year scenario, but most real loans aren't $150k or 25 years. This calculator runs the comparison on your actual numbers.
Why advertised rates lie (a little)
When you see "5.99% home loan!" in a bank window, that's the advertised rate — the contractual interest rate. It tells you how interest is calculated, but it doesn't tell you the total cost of holding the loan, because it doesn't include fees.
Australian lenders are legally required to also publish the comparison rate alongside the advertised rate (National Consumer Credit Protection Act 2009). The comparison rate adds in:
- Establishment / application fees (one-off)
- Annual or package fees (ongoing)
- Settlement fees
- Some lenders include valuation fees if mandatory
What the comparison rate doesn't include:
- LMI (charged based on LVR, not all borrowers pay it)
- Government charges (stamp duty, mortgage registration)
- Break costs (only relevant if you exit early)
- Optional features (redraw fees, offset margins)
The comparison rate is calculated on a standardised $150,000 loan over 25 years. If your loan is materially different — most are — the relative ranking between two loans can shift when you apply it to your actual figures.
Worked example: 5.79% vs 5.99% — which wins?
Loan amount: $600,000 over 30 years.
Loan A: 5.79% advertised, $0 ongoing fees, $0 establishment. Monthly repayment: ~$3,517. Total interest: ~$666,000. Total cost: ~$666,000.
Loan B: 5.99% advertised, $395/year package fee includes free offset and credit card, $0 establishment. Monthly repayment: ~$3,597. Total interest: ~$695,000. Total fees over 30 years: $11,850. Total cost: ~$707,000.
On total cost, Loan A is $41,000 cheaper over 30 years. But — Loan B's offset is included in the package. If you'd average $40,000 in offset over the loan's life, the offset benefit is roughly $130,000 over 30 years (saved interest at 5.99%). After offset, Loan B effectively delivers ~$577,000 of interest paid, which is $89,000 cheaper than Loan A — the package fee is comfortably worth paying.
The lesson: for any loan with offset benefit available, model offset before deciding. Without offset, lower rate wins; with offset, the slightly higher rate often wins.
What to actually compare
When you're shopping multiple offers, line them up on these dimensions:
| Dimension | Why it matters |
|---|---|
| Comparison rate | Headline filter |
| Annual / package fee | $300–$400/year compounds over decades |
| Establishment fee | $0–$700 one-off, often waived |
| Offset rules | 100% offset, partial, or none |
| Extra repayment cap | Variable usually unlimited; fixed capped |
| Redraw rules | Free? Per-redraw fee? Minimum amount? |
| LVR threshold pricing | Some rates are LVR-tiered; check yours qualifies |
| Rate type | Variable, 1/2/3/5-year fixed |
| Discharge fee | $250–$400 when you eventually leave |
The highest-leverage piece for most borrowers is the offset rules — full offset on the variable portion, with no offset margin on the rate, is the gold standard.
Using comparison rates correctly
The standardised comparison rate uses a $150,000 loan over 25 years. Two cases where it misleads:
Large loans, long terms. On a $1,000,000 / 30-year loan, the upfront establishment fee is amortised over $1m and 360 months — its impact is much smaller than on the standardised $150k / 25-year scenario. The advertised rate matters more, fees matter less. Two loans where the comparison rate spread is 0.20% might have an effective spread of 0.05% on a $1m loan.
Small loans, short terms. Inverse: on a $200k / 15-year loan, the establishment fee compresses into a shorter window. Fees matter more, the advertised rate matters less. The standardised comparison rate may understate the impact.
This calculator runs the comparison on your actual loan size and term, removing the mismatch.
Comparing variable vs fixed
The comparison rate calculation treats fixed and variable loans the same way — applying the rate for the full term. That's a clean assumption for a 30-year fixed (which doesn't really exist in Australia) but distorts comparisons for typical 1–5 year fixed periods that revert to variable at the end.
The right approach:
- Run the variable loan at today's variable rate for the full term.
- Run the fixed loan at the fixed rate for the fixed period, then at today's variable rate (or the lender's revert rate) for the rest.
- Stress-test: rerun the variable loan with rates 0.50–1.00% higher mid-term to see what happens if rates rise.
Fixed wins if rates rise meaningfully during the fixed period. Variable wins if rates stay flat or fall. A split loan hedges both.
Cashback offers
Many lenders offer $2,000–$5,000 cashbacks to attract refinancers. Apply the cashback as a fee credit in the comparison:
Effective rate ≈ advertised rate − (cashback ÷ loan amount ÷ years held)
A $3,000 cashback on a $500,000 loan held 5 years is roughly 0.12% off the effective rate over those 5 years (and 0% beyond that, because the cashback was a one-off). For short-horizon refinancers, the cashback is significant. For long-term holders, it averages out to nearly nothing over 30 years.
The trap: chasing cashbacks repeatedly. Multiple refinances within a few years can be flagged on your credit file and some lenders price for that risk on subsequent applications.
What to do with the comparison
- Use the calculator above to run 2–3 specific offers side-by-side.
- Identify the all-in cost difference over your expected hold period (not just 30 years — most people don't hold a single loan for the full term).
- Factor in your offset usage; a slightly higher rate with full offset often beats a lower rate without.
- Confirm LVR pricing applies to your borrowing.
- Negotiate. Lenders frequently match or beat competitor offers if you have a written quote — show your current lender the comparison before committing to a refinance.
For ranking refinance scenarios specifically, see the Refinance Calculator. For modelling offset benefit on either option, the Offset Account Calculator.
Frequently asked questions
What's the difference between the advertised rate and comparison rate?
The advertised rate is the contractual interest rate the lender will charge. The comparison rate is the same rate plus most fees, expressed as an effective annual percentage. Australian lenders are required by law (National Consumer Credit Protection Act 2009) to display both. Two loans at the same 5.99% advertised rate can have wildly different comparison rates if one carries a $395 annual package fee and the other doesn't.
Why is the comparison rate based on a $150,000 loan over 25 years?
Australian regulations standardise the comparison rate calculation on a $150,000 principal over 25 years so consumers can compare like-for-like across lenders. The problem: most current home loans are much larger than $150k and many are 30-year terms. The standardised comparison rate is a useful starting filter, but the relative ranking can shift when applied to your actual loan size and term. This calculator runs the comparison on your specific scenario.
Which fees are included in the comparison rate?
Mandatory fees that apply to all borrowers — application/establishment fee, ongoing service or package fees, annual fees. Excluded: government charges (stamp duty, registration), lender's mortgage insurance (LMI), break costs, and conditional fees that only apply if you do a specific thing (e.g., redraw fee, late payment fee). So a comparison rate captures the cost of holding the loan but not the cost of LMI on a high-LVR borrowing.
How much does a 0.10% rate difference matter?
On a $500,000 loan over 30 years at ~6%, a 0.10% rate difference is roughly $32/month, or $11,500 over the loan's life. On a $250,000 loan, halve those numbers; on a $1m loan, double them. Small percentages compound into meaningful dollars over decades — but a 0.10% rate saving with a $400/year package fee on the cheaper loan is roughly a wash. Always compare the all-in cost.
Should I always pick the lowest rate?
Lowest comparison rate is usually correct for a single-purpose, no-frills variable loan. For more complex needs (offset, multiple linked accounts, fee-free banking package, credit card with annual fee waived) the cheapest rate may not be the best overall product. A package loan at 6.00% with a $395 fee plus a free $300/year credit card and free transactional banking can be cheaper overall than a basic 5.85% loan if you'd otherwise pay for those things separately.
How do I compare a fixed loan vs a variable loan?
It's not a clean comparison because the variable rate isn't known beyond today. Run two scenarios in the calculator: one assuming the variable rate stays at today's level for the full term (best case for variable), one assuming it rises 0.5–1.0% over the next 2–3 years (more realistic). The fixed rate is fixed; the variable's future is uncertain. The right comparison is whether the fixed rate's certainty is worth the typical 0.10–0.30% premium over current variable.
What about cashback offers?
Several Australian lenders offer $2,000–$5,000 cashbacks for new home loans or refinances. Treat the cashback as a fee discount in the calculator: divide it by the loan term in months, subtract from the effective monthly cost. A $3,000 cashback on a 30-year loan is ~$8/month off the effective payment for a year (because the comparison rate amortises it). Fine for short-term holders or refinancers; less impressive over a 30-year horizon.
How do I compare interest-only vs P&I loans?
Interest-only loans have lower repayments during the IO period but higher total interest over the loan's life (because principal isn't shrinking). For an apples-to-apples comparison, model both options at the same rate and compare total interest paid over the full term. P&I usually wins on total cost. IO wins on cashflow during the IO period — useful for investment property where the interest is tax-deductible.
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Last updated: 30 April 2026