Comparison
Rate Schedules - What they mean to you.
The
1st of July 2003 saw the introduction of new legislation
called a Comparison Rate Schedule, aimed at providing
customers with a "true" loan cost estimate.
This is meant to help clients better estimate the
long term cost of a loan over time.
The
new schedule is calculated on the interest rate, up-front
fees and ongoing account administration fees. It is
based on a set 25 year loan term for home loans as
well as the repayment frequency and the amount of
the loan.
It
is important to note that this calculation does not
include government fees or stamp duties or any non-determinable
fees such as redraw, early repayment or related account
keeping fees.
So
while this is a useful tool for homebuyers it is best
used in conjunction with the full range of information
that will help the buyer calculate the full cost of
the loan. Taking into consideration the additional
costs associated with stamp duties, additional costs
for connected accounts and whether the account has
the flexibility to help meet the your needs.
A
Comparison Rate Schedule is set out for a predetermined
loan term of 25 years and is provided by the lenders
for specified loan amounts. This may mean your individual
loan term and amount may not be listed in the schedule
given to you. To get an idea of your comparison rate
you can look at the amount closest to your loan.
A
Comparison Rate Schedule will be handed out to you
for any regulated loan product, the broker should
highlight the product that applies to you. Any investment
or non-fixed credit loans do not require a comparison
rate schedule, so things like credit cards or line
of credit accounts would not require one. You should
receive one whenever you receive interest rates or
when you receive an application form for a loan. You
may also notice the inclusion of comparison rate schedules
whenever a lender or credit provider advertises an
interest rate.
An
example of this schedule would look like this;
The
exact content and layout will vary depending on the
type of loan (ie. fixed or variable) and the rate
itself will vary depending on the lender you choose
to go with.
Copies
of Comparison Rate Schedules distributed by the lenders
used by Independent Mortgage Consulting can be found
on our website. Click
here to proceed.
We
will of course explain the schedule when it is distributed,
and are always available to answer any further questions
simply call us on 02 9939 8823 or email us on info@inmortgages.com.au.
Another source for answers to frequently asked questions
is www.creditcode.gov.au
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