How To Save Money On Your Home Loan With A Different Bank

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You’ve been depositing money with a big bank since you were child. So now that you need a home loan, they’ll reward you for your loyalty, right? Ah, no.

ANZ, Commonwealth Bank, NAB and Westpac don’t do loyalty bonuses. Nor do they compete on price. They save the low interest rates and low fees for challenger lenders.

You might be surprised to learn that there are dozens of home loan lenders in Australia - many of which offer lower interest rates, lower fees and better service than the big four banks.

For example, imagine you’re an owner-occupier and wanted to take out a 30-year, $400,000 mortgage, with a variable interest rate and an 80% LVR (loan-to-value ratio). There are more than 30 smaller banks, credit unions and non-bank lenders with lower interest rates than the big banks.

ANZ currently has the lowest variable rate among the big four, with its Simplicity Plus home loan priced at 3.81%. That puts the total repayments at $671,799 over 30 years.

Lender Product Advertised rate Comparison rate Total repayments
ANZ  Simplicity Plus  3.81%  3.85%  $671,799
CBA  Extra Home Loan  3.89%  3.90%  $678,377
NAB  Base Variable Rate Home Loan  3.87%  3.91%  $676,730
Westpac  Flexi First Option Home Loan  3.98%  3.99%  $685,819

By contrast, if you took out a Rate Lovers Variable Home Loan with Reduce Home Loans, your interest rate would be 3.44%.

That adds up to $641,811 - a saving of about $30,000 compared to the ANZ loan. Of course, a bigger mortgage would mean bigger savings.

Lender Product Advertised rate Comparison rate Total repayments
Reduce Home Loans Rate Lovers Variable Home Loan 3.44% 3.44% $641,811
Easy Street Standard Variable Home Loan 3.49% 3.52% $645,821
Well Home Loans Well Balanced 3.49% 3.53% $645,821
Pacific Mortgage Group Standard Variable Home Loan 3.54% 3.54% $649,844

Note: The two comparison tables show 30-year, $400,000 home loans with variable interest rates and 80% LVRs.

The moral to the story is to shop around. Just because you do your banking with a big four bank, it doesn’t mean you should automatically use the same institution for your home loan.

You could literally save tens of thousands of dollars over the life of your loan if you take your business to one of Australia’s many challenger lenders.

Compare home loans in Australia

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