Repayment Examples and Checklists
Home loan comparison checklist: documents, questions and a two-offer worked example
A practical checklist for comparing Australian home loan offers, the documents lenders ask for, the questions that reveal real cost, and a worked comparison of a basic and a package loan.
To compare home loans properly, put every offer on the same footing: the same loan amount, LVR, loan purpose and repayment type. Then compare four things in dollars: the interest at the rate you are actually offered, the fees over the years you expect to hold the loan, the value of features you will genuinely use (mainly an offset account), and the costs of leaving later (break costs and discharge fees). The checklist below covers what to gather, what to ask, and how to decide, with a worked example comparing a basic loan with a package loan.
This guide is part of how to calculate home loan repayments. You can tick items off in the home loan checklist tool.
Before you ask for quotes
- Your loan amount and estimated property value, giving your LVR
- Loan purpose: owner-occupied or investment; repayment type: P&I or interest only
- Whether you want any part fixed, and for how long
- The features you will actually use: offset, redraw, extra repayments, splits
- How long you expect to keep the loan before selling or refinancing
- Your free credit report from Equifax and Experian, with any errors disputed
Documents lenders usually ask for
| Borrower type | Typical documents |
|---|---|
| PAYG employee | Two recent payslips, possibly an employment letter or income statement |
| Self-employed | Usually two years of personal and business tax returns and ATO notices of assessment; some lenders accept other evidence |
| Everyone | Photo ID, three to six months of bank, savings, credit card and loan statements |
| Refinancers | Recent home loan statements, council rates notice, building insurance |
| Buyers | Contract of sale, evidence of deposit savings, any gift letter |
Under the National Consumer Credit Protection Act 2009, lenders must verify your financial situation, so incomplete documents are the most common cause of delay.
Questions that reveal the real cost
- What is the interest rate for my LVR band, purpose and repayment type, and what is the comparison rate?
- Is the rate a discount off a standard variable rate, and will that discount continue for the life of the loan?
- What are the application, valuation, settlement, annual package and discharge fees?
- Is there a 100% offset account, and does it cost extra?
- Are extra repayments unlimited? Is redraw free, and can it be restricted?
- If fixed: what is the revert rate, the extra repayment cap and the break cost method? Is there a rate lock?
- If there is a cashback: what are the conditions, the deadline and any clawback?
- What term will the new loan have, and can I keep my remaining term?
- How long does approval and settlement usually take?
Worked example: basic loan vs package with offset
Illustrative $550,000 loan, average offset balance $30,000:
| Offer X: basic variable | Offer Y: package variable | |
|---|---|---|
| Rate | 5.94% | 6.04% |
| Annual fee | $0 | $395 |
| Offset account | No | Yes, 100% |
| Upfront fees | $0 | $0 |
Approximate first-year interest:
- Offer X: $550,000 x 5.94% = $32,670. The $30,000 sits in a savings account instead, earning, say, 4.50% before tax: $1,350, or about $918 after a 32% marginal rate including Medicare levy. Net cost about $31,752.
- Offer Y: ($550,000 - $30,000) x 6.04% = $31,408, plus the $395 fee = $31,803.
On these numbers the two are within about $50 a year, with X slightly ahead. Change one assumption and the answer moves:
- If your average offset balance is $50,000, Y's interest falls to ($500,000 x 6.04%) = $30,200 + $395 = $30,595, while X with $50,000 in savings nets about $32,670 - $1,530 = $31,140. Y is ahead by about $545 a year.
- If you have no spare savings, X is ahead by $550 of interest plus the $395 fee, about $945 a year.
Red flags in an offer
| Red flag | Why it matters |
|---|---|
| Honeymoon rate for one or two years | Reverts to a higher rate; compare the comparison rate and revert rate |
| Cashback tied to a higher rate | Can cost more than it pays within a couple of years |
| New loan term longer than your remaining term | Lower repayment, more total interest |
| Rate only for the first settlement month | Some offers depend on settling by a date |
| Broker unable to explain why this lender suits you | Brokers must act in your best interests and should document why |
Make the decision
- Shortlist two or three offers that meet your feature needs.
- Calculate repayments for each on your remaining term with the repayment calculator.
- Add fees for the years you expect to hold the loan.
- Value the offset at your expected average balance.
- Give your current lender the best offer in writing and ask it to match.
- If switching, work out break-even with the refinance calculator and follow the refinancing process guide.
Frequently asked questions
How many lenders should I compare?
There is no fixed number. Two or three written offers plus your current lender's best response usually show the range. A broker can compare more lenders but not every lender in the market.
Does each application affect my credit score?
Each formal application usually records a credit enquiry on your report. Getting indicative quotes or using a broker who assesses your scenario first can limit unnecessary applications.
What is a key facts sheet?
A standard summary of a home loan's cost on your loan amount and term, which lenders must provide on request for standard home loans. It makes like-for-like comparison easier.
Should I choose the lender with the best app?
Features matter, but a lower rate saves real money every month. Choose on cost first, then convenience.
Sources
- ASIC Moneysmart — choosing a home loan and key facts sheets
- OAIC — accessing and correcting your credit report
- ASIC — responsible lending and the best interests duty for brokers
