Home Loan Ratings Are Worthless

By Matthew Kenworthy | General Info

You often see advertisements where lenders talk about their ‘5 Star Home Loan’. But how exactly does a home loan receive 5 Stars?

Unless you the exact criteria for the judging the awards, you can’t know why it scored what it did. If you don’t know why it achieved that rating, you can’t know if it is right for you.

Home Loans Should Be Personal

You’re an individual. And the home loan you choose should be tailored to your individual needs. This should includes your needs both now, as well as how you see things changing in the future.

A simple home loan rating doesn’t take this into account.

What Numbers Matter

There are some obvious criteria that can be used when rating home loans. The most common being the interest rate. Just like a golf score, the lower, the better!

Just because a bank offers a low interest rate, it doesn’t mean the loan is right for you. The home loan may not offer all the features that you need. As a general rule, lower interest rates usually mean less features and flexibility.

Application fees & ongoing fees are also important to consider. There’s no point paying high ongoing fees for features you are unlikely to use.

Some Features Don’t Matter To You

Some high scoring home loans, earn extra ratings points for having an offset account.

As a borrower you may be unlikely to need an offset account because you won’t have a lot of spare cash. Or you might be able to achieve the same effect by utilising redraw workout paying ongoing fees. An offset account becomes worthless to you and not worth the extra ‘star’ they may give it.

When we look at the right home loans for our clients, we look at each individuals situation. A magazine or consumer group can only rate home loans for a broad section of the market.

If you need personalised advice relating to your home loan situation please contact us. We’ll be happy to let you know how we ‘rate’ each home loan for your situation.

About the Author

Matthew Kenworthy is a specialist in all aspects of Residential & Commercial Finance. He can assist all borrowers from First Home Buyers to Property Investors with Large Portfolios.