Money Magazine Best Home Loans 2011

Identifying Australia’s Best Deals for Home Loans

When deciding on a bank or non-bank for a mortgage loan, there are many factors to consider. The top determining factors are the interest rate, the amount of the loan, and the fees attached. Loan packages are often reserved for the larger home loans, most notably in excess of $250,000. Loans of a smaller nature have proportionately higher yearly fees.

Although the interest rate may be the same for high mortgages, the yearly fees can factor in to represent a cost reflective of a higher rate. For instance, a mortgage of $200,000 as compared to one of $400,000 has yearly package fees that amount to .09% more in interest costs. The comparisons for loan packages takes into account up front and ongoing fees to make it clear how much a package actually costs. Most lenders should have a comparison rate schedule at their website. If not, perspective borrowers should ask to see the information.

Non-banks often say they have no up front fees, but often they outsource legal and valuation fees so that the cost is part of the package. Technically, they do not charge them; they just pass them on to the borrower. It’s important to understand all the charges to see what the complete package costs.

Featured Home Loan

Awarded the 2011 Non bank Lender of the Year Dream Loan Dream Catcher​ Home Loan features a low variable interest rate, plus no application fee and no additional repayment fee. Offer available for a limited time only.

• Interest Rate of 5.85%
• Comparison Rate of 6.21%
• Application Fee of $0
• Maximum LVR With LMI: 80%
• Minimum Borrowing: $50,000
• Maximum Borrowing: $750,000

Enquire about the Loans.com.au – Dream Catcher​ terms and conditions

Best Home Loans Comparison

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
Loans.com.au – Dream Catcher​	A home loan offer with $0 application fee and one of the lowest available home loan interest rates in the market.	5.85%	6.21%	$0 / $375	80%	$50,000 / $750,000
Illawarra Home Loans Bank Beater Home Loan	A low variable rate, beaten down even further by 0.05% p.a. after 5 years.	6.07%	6.35%	$0 / $345	90%	$250,000 / $1,000,000
State Custodians Mortgage Company Breathe Easy Offset Loan	Awarded Best Non Bank Basic Variable Loan of 2011 this fantastic product comes with no fees and a stack of features including unlimited redraw and free 100% interest offsetting.	6.27%	6.18%	$0 / $0	95%	$150,000 / $1,000,000
HomeStar No Fee 100% Offset	Enjoy no fees and zero mortgage insurance to pay. HomeStars offset loan allow flexible repayment frequency, interest only repayments and visa debit card and full banking functionality.	6.26%	6.26%	$0 / $0	90%	$250,000 / $750,000
State Custodians Mortgage Company Standard Variable Offset Loan	Voted the best loan for first home buyers, this loan offers no application or ongoing fees and a stack of great features including unlimited redraw and 100% interest offsetting.	6.02%	6.23%	$0 / $345	95%	$150,000 / $1,000,000
Super Rate Fee Saver Home Loan	Fully featured loan offering one of the best rates on the market. Perfect for first home buyers or those looking to upgrade their existing home. Unlimited redraws, and flexible repayments.	6.25%		$0 / $0	95%	$50,000 / $2,000,000
Community First True Basic Home Loan	An easy to manage loan with all the standard features available as an option. Enjoy no annual or monthly account keeping fees.	6.59%	6.68%	$500 / $0	95%	$100,000 / $1,000,000
MyRate Advantage Rate Loan	Zero fees, unlimited redraws and interest only repayments. One of the best all-round loans on the market, perfect for first home buyers or those looking to refinance.	6.15%	6.15%	$0 / $0	95%	$100,000 / $2,000,000
HomeStar Advantage Loan	No upfront or annual fees offering unlimited free redraw and full banking functionality.	6.63%	6.63%	$0 / $0	95%	$150,000 / $2,000,000

Least Expensive Home Loans

Mortgage brokers do not always have the cheapest loans because they draw a commission on top of what the lender charges for interest. For the person who doesn’t mind doing some of the work in handling other products, it is sometimes cheaper to approach the lender directly.

One way that lenders are keeping monthly payments down for borrowers is by offering 30-year loans instead of the traditional 25-year ones. This is a two edged sword because the monthly payment may be lower, but the overall pay out will be more. If a borrower pays the extra five years on a $250,000 loan financed at 7%, the total paid for the home would be almost $69,000 more (the difference between $348,772 and $280,084).

Obviously the shortest payment term a person can manage the less will be paid. If a longer term is contracted, paying additional payments as possible trims off the total interest over the life of the loan.

The cheapest loans were determined by their AAPRs. These were determined by using 50% advertised rate and 50% average of the 6-month historical rate on a loan for $300,000 financed for 30 years at 75% loan to value ratio.

The top three (tie between 3 and 4) of the lowest priced home loans in banks are:

1. ING Direct SmartPack Mortgage Simplifier: Offers 6.59% interest with no annual fees, but the $719 up front costs compensate for that. The interest rate can be reduced by 0.06% if the loan is $300,000 or more.
2. NAB Tailored Choice Package: The interest rate is 6.64% with no up front costs. There is a $395 annual fee. Because of the package, this makes the overall cost higher to the borrower, and this loan is only available for mortgages of $250,000 or more.
3. AMP Banking Basic Variable:There are no annual costs, but the up front price is $895. The interest rate is 6.62%.
4. ANZ Simplicity Plus:This loan offers an interest-only option for the first ten years. A repayment holiday can be used for a time when there is a break in work or the family wants to go on holiday. There is no annual fee and an interest rate of 6.72%. Up front costs are $600.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
ING Direct Mortgage Simplifier Home Loan	ING Direct Mortgage Simplifier Home Loan	6.42%	6.42%	$0 / $0	95%	$50,000 / $2,000,000
NAB National Choice Package ($250,000 and above)	National Choice Package ($250,000+)	6.29%	6.65%	$0 / $395	95%	$250,000 / $10,000,000
AMP Bank Basic Variable Rate Loan	A competitive low rate without the expensive extras.	6.62%	6.69%	$295 / $0	90%	$40,000 / $2,000,000
ANZ Simplicity Plus Basic Home Loan	Additional repayments and a low variable rate for the life of the loan	6.72%	6.77%	$0 / $ 0	80%	$50,000 / $1,000,000

The non-banks offer some of the best interest rates. The top three are:

1. Pacific Mortgage Group’s Standard Variable: Featuring the lowest rate of 6.25%, this loan offers flexibility. Terms can be up to 30 years and the borrower only needs 10% down. There are unlimited redraws without charge and no value limit on each redraw. It is the only lender listed that has no annual or up front costs.
2. Rate Busters Fightback Premium: Borrowers must have a 20% deposit to obtain this loan, but there are some good extras. The loan can be split into up to four accounts and there is an option for an offset. Up front costs are $512, but there is no annual fee. The interest rate is a low 6.38%.
3. State Custodians Standard Variable:The applicant can borrow up to of the property’s value if it is a new loan or 90% on a refinance. The loan does, however, require mortgage insurance. The borrower can get pre-approval and if the loan is maintained for as long as five years, an interest discount of 0.15% is applied. There are up front costs of $660 and yearly fees of $345. The starting interest rate is 6.22%.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
State Custodians Mortgage Company Standard Variable Offset Loan	An award winning loan with one of the lowest rates on the market!	6.02%	6.23%	$0 / $345	95%	$150,000 / $1,000,000

Least Expensive Home Loan Packages

As the name implies, a home loan package includes everything in the way of cost that is applied to the final bottom line. By packaging, discounts can be made that can include as much as 0.7% on the interest rate. Of course, this only works by keeping financial products with one provider. Packages usually include a transaction account with a credit card for the convenience of the borrower. This can carry a high monthly fee or an annual package fee.

Taking into consideration the yearly or monthly package fees, the package loan might not be the best value. Evaluation of taking care of the other products associated with the loan independently of it may prove to be a cheaper way to set the mortgage up.

The least expensive package loans are rated in bank and non-bank. Beginning with the APR (based on 50:50 advertised variable rate and historical rate for a $300,000, 30year loan), other factors required each package to offer a discounted interest rate, a credit card with no monthly fees, and a no-fee account. The winners in banks are:

1. National Australia Bank’s Tailored Choice Package: This package offers savings across many products other than just the home loan. It features no annual fee on the NAB credit card and no monthly service or transaction fee. Within the package, borrowers can get special rates on term deposits and a discount on MLC Life Insurance. The $395 annual fee should pay for itself in combined savings. The minimum mortgage for this package is set at $250,000 to prevent borrowers with small loan requests. The bank interest rate is 6.64%.
2. AMP Banking Select T2: This package has a lower minimum loan of just $100,000 and the interest rate is 6.80%. The annual fee is $349.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
NAB National Choice Package ($100,000 to $249,999)	National Choice Package ($150,000 /$249,000)	6.39%	6.75%	$0 / $395	95%	$150,000 / $249,999
AMP Bank Introductory Professional Package Variable Rate Loan ($100,000-$249,999)	Offers a range of discounts to help you save.	6.42%	7.18%	$295 / $349	90%	$100,000 / $2,000,000
Suncorp Money Manager-My Home Package	Keep managing your finances convenient with this great loan .			$0 / $300	90%	$0 / $0

Non-banks offer slightly lower interest rates in their package deals. All three listed providers require a minimum loan of $250,000. The winners here are:

1. Newcastle Permanent’s Premium Plus Package: The package includes an additional ½% on a Rapid Saver account and discounts of as much as 10% on insurance products including travel, home, and cover. The annual fee is waived for the Newcastle credit card. The interest rate is 6.57% and the annual fee is $350.
2. Queensland Police Credit Union Classic Plus: Features a 6.79% interest rate and an annual fee of $300.
3. Heritage Bank Professional: Interest rate of 6.68% with a yearly $250 fee.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
Newcastle Permanent Premium Plus Package Home Loan	Premium Plus Package Home Loan	6.03%	6.35%	$0 / $350	95%	$5,000 / $10,000,000
Heritage Bank Bridging Loan	Heritage Bank Bridging Loan	7.44%	7.51%	$900 / $0	85%	$20,000 / $9,999,999

Best Value Flexible Home Loans

Portability is a feature many Australians look for in a loan because they move every seven years on average. It is much simpler to take the accrued value on an old home and put it toward the deposit on a new one instead of going through the loan process on every move. Refinancing or paying off the old loan results in discharge costs on one loan and establishment fees on the other.

Loan portability saves on some charges, but there can be others when a resident moves. There are usually valuation fees associated with changing homes, and if the new loan is 80% or more of the new property’s value the lender will ask for mortgage insurance on the loan.

A redraw allows a borrower to access any extra payments made on the loan for cash in an emergency. The borrower who plans never to leave one dwelling might use the redraw on occasion without much concern, but when moves are anticipated regularly, redraws can hurt because they take away from home equity.

It is always a better way to get ahead and more profitable to make extra repayments for the times when things might be difficult. Redraws should be avoided if possible because they take away from the advantage gained by early repayments.

Flexible loans add another dimension to home ownership. Features such as offset accounts and redraws can be utilized to save interest to pay off loans faster. At one time, these options resulted in much higher interest rates. Now the rates for the cheap loan and the flexible one are so close that it is often more worthwhile to take the flexible loan for peace of mind and to have different options.

In determining the lowest price leaders for flexible loans, each had to offer redraw, offset, split facility, and portability. The interest rates were determined by the AAPR based on a 50:50 advertised variable rate and the historical rate for a 30-year loan on $300,000. For flexibility, these are the clear winners in the bank division based on current information.

1. NAB Tailored Choice Package: Redraws are limited to minimum of $2,000 and there are no fees for it. The interest rate is at 6.64% with no up front fees and an annual cost of $395.
2. AMP Banking Basic Variable: This loan can be split across 10 facilities with fixed and variable rate combinations of any kind. Borrowers should be cautioned that there can be fees applied for splitting the loan. The interest rate is 6.67% and up front costs are $895. If the loan is for more than 90% of the home’s value, an extra 0.6% interest is added on the loan.
3. Laiki Bank Options Plus: This variable loan stands at 6.71% and there are up front costs of $580 and yearly fees of $120.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
NAB Portfolio Facility (LOC) – $250,000 – $499,999	Portfolio Facility ($250,000 /$499,999)	6.56%		$0 / $550	90%	$250,000 / $499,999
AMP Bank Basic Variable Rate Loan	A competitive low rate without the expensive extras.	6.62%	6.69%	$295 / $0	90%	$40,000 / $2,000,000

Non-bank winners have a tie for second place.

1. Newcastle Permanent’s Premium Plus Package: There are no value restrictions placed on redraws. The interest rate is 6.57% and there is a yearly fee of $350. The loan also offers repayment holidays as stipulated.
2. Assured Home Loans Fightback Premium: There is no charge for a split done prior to the settlement, thereafter it costs $100. The up front cost is $912 and the interest rate is 6.58%. QuickDirect Online Equity Saver Premium: Tied for number 2, this loan has no up front or annual costs. The rate is the same as Assured at 6.58%.
3. Queensland Police Credit Union Classic Plus Package: The interest rate is 6.60% and there are no up front costs. There is an annual fee of $300.

3-Year Home Loans and 5-Year Fixed Investment Loans

When interest rates are on the rise, getting a better rate on your loan is a very appealing option. Select a fixed term with caution because opting for a variable rate before the fixed term has expired can result in extensive “break costs.” New laws put into effect on loans made after July 2010 do allow borrowers to challenge these costs if they deem them to be excessive or unfair, but this can require a lot of legal expense.

Before you commit to a fixed rate, you might consider a loan split with a portion of the loan having a fixed rate and the other part having a variable rate. Here’s more information on the best 3-year fixed home loans.

Best 3-Year Fixed Home Loans – Banks

1. HSBC PowerVantage- this loan offers the best 3-year fixed rate. The lowest rate applies when the loan is taken out as a part of the PowerVantage package, providing a 0.1% discount on the loan. The rank rate is 7.08% and the annual fee is $240. The upfront fee is $550.
2. HSBC- the rank rate is 7.18%; there is no annual fee and an upfront fee of $850.
3. AMP Banking – the rank rate is 7.33%; annual fee is $349 and upfront fee is $645.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
AMP Bank Professional Package – 1 Year Fixed Rate	Excellent features from a respected lender.	6.09%	6.86%	$295 / $349	90%	$40,000 / $2,000,000

Best 3-Year Fixed Home Loans – Non Banks

1. Pacific Mortgage Group – another winner, this loan charges no application fee and no annual maintenance fee; has a rank rate of 7.01%.
2. Holiday Coast Credit Union – the rank rate is 7.04%; annual fee is $0 and application fee is $535.
3. Heritage Bank – the rank rate is 7.10%; annual fee is $60 and upfront fee is $600.

5-Year Fixed Investment Loans

Only a brave investor would fix their loan rate for five years, but some investors think it makes plenty of sense. When you fix the loan rate, the annual interest charge is known up front, and investors can claim 12 months of prepaid interest which allows an expedited tax deduction for the interest expense.

In this scenario, of course, the owner/occupier would have to have the means to be able to prepay the interest, but it can be a great way to manage taxes during years when income is expected to be higher than usual.

Here’s a look at the best 5-year fixed investment loans.

Best 5-Year Fixed Investment Loans – Banks

1. HSBC PowerVantage – includes discounted fees on financial planning services and preferred rates on term deposits. The fees are $20 each month and there is also an application fee of $550. The rank rate is 7.39%.
2. HSBC – rank rate is 7.49%; there is an application fee of $850 but no annual or monthly fee.
3. ING Direct – rank rate is 7.75%; application fee is $719 but there are no monthly fees.

1. Greater Building Society – rank rate is 7.50%; there are no annual or monthly fees and no application fee.
2. Heritage Bank – rank rate is 7.57%; upfront fee is $600 and annual fee is $60.
3. Unicredit WA – rank rate is 7.61%, but there are no upfront or annual fees.

Reverse Mortgages and Low-Doc Loans

Equity holding seniors and self employed individuals have special needs when it comes to mortgage loans. Reverse mortgages allows equity holding seniors the opportunity to draw on the home’s equity by way of a loan secured by the residence. The funds can be distributed in a series of payments or in one lump sum.

While it is typical for the reverse mortgage to remain unpaid until the home is sold or the owner dies, some lenders allow repayments of the mortgage prior to these events taking place. The global mortgage dilemma resulted in many lenders ceasing to offer reverse mortgages. Those that do offer them do so at an interest rate higher than the regular home mortgage.

If property values do not rise at a comfortable rate, the interest fees will take a big hunk out of the home’s equity. The younger the borrower is on a reverse mortgage loan, the larger the impact on the equity. It is essential to seek out a lender that offers a “no negative equity” guarantee. This prevents the borrower from having to repay more than the home’s value. Here are the top rated lenders offering reverse mortgages.

Best Reverse Mortgages

1. Australian Seniors Finance Lifetime Loan - this reverse mortgage plan offers equity protection, which allows the borrower to protect a percentage of the sale proceeds of the home regardless of balance of the loan. The minimum age requirement is 60 and the interest rate is 8.25%. The max loan amount is $250,000 and the application fee is $995.
2. Commonwealth Bank Equity Unlock- the minimum age requirement is 65 and the interest rate is 8.46%. The max loan amount is $425,000 and the application fee is $950.
3. Bankwest Seniors Equity Rise- the minimum age requirement is 65 and the interest rate is 8.15%. The max loan amount is $250,000 and the application fee is $700.

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
Commonwealth Bank Equity Unlock	No lump sum or periodic withdrawals and no regular repayments needed.	8.16%	8.26%	$950 / $12	45%	$20,000 / $425,000
Bankwest Seniors Equity Release Home Loan	No repayments required for the life of the loan!	7.83%	7.87%	$700 / $ 0	25%	$20,000 / $2,500,000

Best Low-Doc Loans

Low-doc loans are intended for self employed workers who are unable to provide the traditional proof of income to a lender such as pay cheque stubs. Because income for self employed individuals is more unpredictable, lenders view these borrowers as high risk. This results in higher interest rates and more restrictive terms than with standard mortgages. Here’s a rundown of the best low-doc loans offered by banks.

1. NAB Tailored HL Low-Doc – this is the favoured low-doc loan among banks. It allows self employed individuals to borrow 80% maximum loan to value ratio. Application fee is $600 and annual fee is $96. The max rate is 7.24%.
2. CBA Standard Variable Low-Doc- qualifying applicants can borrow 80% maximum LVR. Application fee is $750 and annual fee is $96. The max rate is 7.36%.
3. NAB FlexiPlus Low-Doc- borrowers can obtain a loan of up to 80% of the LVR. Application fee is $600 and the annual fee is $250. The max rate is 7.39%.

These are the best low-doc loans offered by non-banks.

1. RAMS Self-Employed Pro Pack 1- this loan offers an incredible 6.69% max rate, but the catch is that borrowers must put down a deposit equal to 40% of the property value. Application fee is $895 and annual fee is $300.
2. RAMS Self-Employed Pro Pack 80- the max rate on this RAMS product is 6.89%. Down payment required is 20% of the property value. Application fee is $895 and annual fee is $300.
3. Homeloans Ultra Plus Low-Doc – the max rate is 7.14%. Down payment required is 20% of the property value. Application fee is $1082 and annual fee is $330.

Related posts:

1. How To Switch Home Loans and Save Money
2. 100% Home Loans
3. Suncorp Bank Money Manager – My Home Package
4. Home Loan Comparison for Future Home Owners
5. Commonwealth Bank Wealth Package ($150,000-$250,000)
6. Need Some Money? Unlock the Equity in Your Home
7. Commonwealth Bank No Fee Variable Rate Home Loan
8. Professional Package Home Loan — Advantages, Lenders & Fees
9. Can you Save Money by Refinancing
10. IMB Home Loans

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Top Home Loans

Home Loan	Details	Interest Rate (p.a.)	Comp Rate^ (p.a.)	App Fee / Ongoing Fee	Max LVR	Min & Max Borrowing
Loans.com.au - Dream Catcher​	A home loan offer with a $0 application fee and one of the lowest available home loan interest rates.	5.85%	6.21%	$0 / $375	80%	$50,000 / $750,000
Bankwest Online Home Loan	A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online.	5.97%	5.97%	$0 / $0	80%	$100,000 / $1,000,000
Illawarra Home Loans Bank Beater Home Loan	A low variable rate, beaten down even further by 0.05% p.a. after 5 years.	6.07%	6.35%	$0 / $345	90%	$250,000 / $1,000,000
State Custodians Mortgage Company Standard Variable Offset Loan	Awarded the 2011 Non bank Lender of the Year this feature-packed loan rewards customers with a bonus rate drop of 0.25% after 5 years.	6.02%	6.23%	$0 / $345	95%	$150,000 / $1,000,000