Free · Australia
Compare two home loan options side by side — interest rate, fees, and total borrowing cost — to identify the genuinely cheaper deal.
Better option
Option B
Estimated saving: $49,068
$4,287
A monthly
$4,152
B monthly
$1,544,222
A total cost
$1,495,154
B total cost
Choosing between home loans based solely on the advertised interest rate is one of the most common — and costly — mistakes Australian borrowers make. A loan with a lower headline rate can still cost you tens of thousands more over its life once fees, charges, and product features are taken into account. Understanding the true cost of credit is the foundation of any sound loan comparison.
The single most useful number when comparing loans is the total cost of credit — the sum of every dollar you will pay over the life of the loan. It accounts for both the monthly repayment and any upfront establishment fees.
Suppose you are comparing two $700,000 loans with 30-year terms:
Despite Loan B charging $700 more in upfront fees, its lower rate saves $43,580 in total interest over 30 years — making it the genuinely cheaper option by $43,580. The rate difference of 0.30% compounded over three decades is far more powerful than the fee difference.
If one loan charges significantly higher upfront fees but a lower ongoing rate, there is a break-even point — the number of months after which the rate saving overtakes the fee disadvantage. If you plan to sell or refinance before that point, the higher-fee loan may actually cost you more.
Using the loans above: Loan B has a $700 higher fee but saves $123/month in repayments ($4,276 − $4,153). Break-even = $700 ÷ $123 ≈ 6 months. After just six months, Loan B is ahead. If you intend to hold the loan for at least two years, Loan B wins convincingly.
This analysis assumes you do not switch loans mid-term and that the variable rate on either loan does not change significantly. Use our calculator to model both scenarios with your real numbers.
Total cost of credit — the sum of all repayments plus upfront fees over the full loan term. A loan with a marginally lower interest rate can still cost more overall if its fees are significantly higher. Always compare the complete picture, not just the headline rate.
The comparison rate is a standardised figure that incorporates both the interest rate and most ongoing fees into a single percentage, making it easier to compare like-for-like. In Australia, lenders are legally required to display a comparison rate alongside their advertised rate. It is calculated on a $150,000 loan over 25 years, so it may not perfectly reflect your situation, but it is a helpful starting point.
No — if the total cost of credit (repayments + fees) is lower on the high-fee loan, then yes, it can be cheaper overall. This typically happens when the lower-fee loan has a significantly higher interest rate that outweighs the fee saving over a long term. For short holding periods (e.g., refinancing after 3 years), upfront fee differences have less time to amortise, so lower-rate, higher-fee loans become less attractive.
You can, but keep in mind the comparison is inherently uncertain for variable loans because the rate may change. Our calculator lets you model a variable loan at today's rate as a worst-case or best-case estimate. A common strategy is to compare: (a) full variable, (b) full fixed, and (c) a split arrangement to understand the range of outcomes.
Offset accounts reduce the loan balance on which interest is calculated daily, effectively lowering your interest cost without changing your contracted rate. Redraw allows you to access extra repayments. Neither is captured in a pure rate-and-fee comparison, so if one loan has a 100% offset account and the other does not, factor in the value of funds you would regularly hold in offset when deciding.
If you sell, refinance, or make large lump-sum repayments on a fixed-rate loan before the fixed period ends, the lender may charge a break cost (also called an economic cost fee). These can be substantial — sometimes tens of thousands of dollars — and are not easily predictable. If there is any chance you will exit the loan early, fixed loans carry hidden switching risk that a simple rate comparison will not reveal.