A comparison rate is the rate you see displayed next to the interest rate being offered by a lender.
It must be included with any advertised home loan interest rate and is designed to give you a more accurate picture of the loan you’re considering with some of the costs included.
The comparison rate is calculated by adding any fees and charges to the interest rate and then converting that figure to a percentage rate.
But as well as the interest rate and fees being charged, other factors can affect the actual cost of the loan, such as the loan amount, the loan term and the repayment frequency.
That’s why it’s always a good idea to use one of the many free comparison rate calculators that are available online to come up with a rate that provides a more accurate cost of the particular loan you’re considering.
Home Loan Guide