The lowest advertised rate is a starting point, not the whole comparison. An offer might include a temporary discount, charge for features you need or restrict the extra repayments you expect to make. Compare the actual proposal for your borrowing amount and plans rather than two different advertisements.
An independent broker introduced through our finance and lending service can explain why shortlisted products suit your circumstances. This article focuses on evaluating that shortlist; our offset account guide explains the feature itself in more detail.
Put the offers on the same basis
Use the same loan amount, loan term, repayment frequency and repayment type. A lower monthly payment on a longer term is not necessarily a lower-cost loan. Similarly, an interest-only payment is not comparable with a principal-and-interest payment without considering the remaining balance and repayments after the interest-only period.
Request the relevant Key Facts Sheets and a written breakdown. Moneysmart explains that comparison rates combine interest and most fees, but they are not a complete description of every cost or condition. An advertised comparison rate may use assumptions that differ from your loan. Ask which costs are included and which are excluded.
Create a comparison worksheet
- Initial rate, whether it is fixed or variable, the discount period and what happens when that period ends.
- Application, valuation, settlement and ongoing fees, including package or account charges.
- Expected repayments and remaining balance over the same review period, with assumptions stated.
- Offset eligibility, whether it is full or partial, linked accounts and any extra cost.
- Extra repayment limits, redraw rules and access restrictions.
- Discharge, switching and potential fixed-rate break costs, plus costs of refinancing the existing loan.
Test features against how you use money
A hypothetical borrower who keeps little cash in an offset should not assume that an offset package is valuable simply because it is available. Another borrower expecting irregular bonuses may care more about unrestricted extra repayments. Ask for an estimate using realistic balances and payment timing, not a best-case savings figure.
Fixed rates can offer repayment certainty during the fixed period, but restrictions and break costs may matter if you plan to sell, refinance or pay down the balance early. Variable rates can change. Neither arrangement removes the need to understand affordability if circumstances or repayments change.
Separate product comparison from approval
Check whether the quoted offer is subject to a valuation, a particular loan-to-value ratio, income verification or settlement timing. Ask when the quote expires and whether a rate lock is available or costs extra. Pre-approval and an attractive quote do not remove final lender conditions.
Keep the worksheet and ask the broker to explain the trade-off, their lender panel and any fee or commission. You are comparing the products actually available through that broker, not necessarily every loan in Australia. If the explanation is unclear, ask for an alternative or more time rather than signing under pressure.
One common comparison trap
Should a cash-back offer decide the loan?
Treat it as one item in the calculation. Confirm eligibility and timing, then compare ongoing cost, refinancing expenses and features over the same period. An upfront incentive does not establish that a loan is suitable or less expensive overall.
