While the comparison rate can be a useful tool, Your Mortgage has gone even further and developed its own method to uncover the 'true cost' of a mortgage.
We compared all 78 (18 bank products and 60 non-bank products) line of credit (LOC) products in our books by taking into account every fee, including upfront, ongoing and deferred establishment fees, as at 22 November 2007.
By working out how much a given loan will cost you after a range of time periods - three, five and 10 years - we show the impact that these fees can have on the total cost of your mortgage. By adding all fees to the cost of principal and interest (P&I), we calculate the true cost of a mortgage over three, five and 10 years. This month, we based our calculations on a loan amount of $300,000 at 80% loan-to-value ratio taken over 30 years.
And the winner is...
Macquarie Mortgage's SELECT Line of Credit & Combo has won the best value award for the bank category, while the Rate Busters LOC emerged as the winner in the non-bank category.
Macquarie's SELECT Line of Credit & Combo also scooped the top awards in the banking category, thanks to its competitive interest rate of just 7.89% and low total cost of $670. The product smashed the competition in all three categories - three, five and 10 years - offering borrowers an average saving of $7,723 against the average true cost of the same type of loan in our books.
While initially losing out to One Direct's Equity Loan due to its higher total cost and exit fees, the Rate Busters LOC product came out on top after the total true costs in all three categories were tallied.
The biggest advantage of the Rate Busters LOC is its low interest rate of 7.65% as at 22 November 2007 - the lowest of all the top-ranking LOC products. This attractive rate could help you save $9,019 over five years and $17,898 over 10 years, compared to the true cost of an average LOC loan in our database.
For the complete list of top ranking LOC products, read the latest issue of Your Mortgage, on sale now.
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