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Property investors and homebuyers have been cautioned about ‘bargain’ mortgage rates and reminded to always check comparison rates to find the best deal.
Kim Cannon, managing director of Firstmac, which powers loans.com.au, said eager borrowers who do not do their research could end up costing themselves more than $100,000 in extra interest payments.
Mr Cannon offered an example of a fixed interest rate loan currently on the market at 3.95 per cent per annum, with a comparison rate of 5.05 per cent.
He said every additional 0.25 per cent in interest is worth about $73 a month in higher repayments for a $350,000 home loan. Mr Cannon said that equated to an extra $875 each year and potentially more than $26,000 over a 30-year loan term.
“So if the difference in the interest rate is more like 1.1 per cent, that is about $114,999 in extra interest over the life of the loan,” he said.
Mr Cannon said investors and homebuyers looking for a home loan need to be alert to tricky marketing by lenders.
“The message is simple – ignore the teaser rate because that’s not what you will pay. The true cost of the loan is what the comparison rate will tell you. Over the life of the loan this is likely to add up to many thousands of dollars.”