## Cost of loan the only true comparison

A few years ago I was developing software for mortgage brokers and I was trying to offer a better outcome than the mandatory comparison rate schedule because as discussed here it was simply confusing matters.  I developed an Actual Rate calculation that was pretty good but still didn’t handle fixed rates or split loans at all well.

It then came to me that the best way to compare two home loans was to say – OK if I refinance in 3,5 or say 7 years – tell me how much in simple dollar terms will one loan cost as compared to another taking all fees and charges into account.  It’s so simple why doesn’t everyone use it … and the answer is that is quite a complex bit of mathematics.  But it was worth the effort and now for a simple example – we figure out your loan requirements and the which products are suited to your needs then compare:

Cost of Loan Comparison

The following table shows the calculated cost of your loan if you were to refinance it or discharge the loan with a lump sum payment at a given time. The cost includes all known establishment and exit fees net of lender rebates and fee waivers – it is not possible to calculate early pay out fees on fixed rate loans. Minimum Loan and Max LVR is stated only where the lender’s discount is based on these.

The calculation period is based on paying out the loan after 60 months on a loan amount of \$432,842 based on a full loan term of 30 years.Ongoing rates are not guaranteed after any initial period.

 Lender Product Description Min Loan Max LVR Initial Rate Initial Months Ongoing Rate Actual Cost Adelaide SmartFix Fixed 3 Years \$10,000 95% 5.99% 36 6.11% \$127449 Adelaide SmartFit Variable \$10,000 95% 6.21% 0 6.21% \$131222 AMP Essential Home Loan \$40,000 90% 5.90% 0 5.90% \$124121 AMP Basic Fixed 3 Year \$100,000 90% 5.99% 36 6.07% \$126986 ANZ Breakfree \$250,000 80% 6.10% 0 6.10% \$130006 ANZ Fixed 3 Year Breakfree \$100,000 80% 6.33% 36 6.10% \$133080 Heritage Discounted Variable \$150,000 95% 5.79% 0 5.79% \$121894 Heritage Fixed – 3 Year \$20,000 95% 5.85% 36 6.13% \$125819 meBank Members Package Fixed 3 years \$50,000 5.74% 36 6.08% \$124808 meBank Members Package Variable \$50,000 6.08% 6.08% \$129352