Do You Know How to Compare Home Loans in Hobart?

Comparing home loans means looking past the advertised rate

Most lenders in Hobart advertise a headline variable rate, but the product you're actually approved for depends on your deposit size, property type, and employment structure. A loan at 6.10% with a full offset account and no monthly fee can cost less over five years than a loan at 5.95% with a $15 monthly account-keeping charge and no offset.

Consider a buyer purchasing in Lenah Valley who has a 15% deposit. One lender offers a variable rate of 6.24% with an offset account. Another offers 6.08% but charges $395 annually and does not include an offset. If the buyer parks $30,000 in the offset from day one, the net cost over the first three years favours the first loan even though the advertised rate is higher. This type of calculation requires comparing both the interest rate and the features that affect how much interest you'll pay.

Does a fixed rate still make sense at current levels?

Fixed rates in Hobart sit between 5.85% and 6.40% across most lenders depending on whether you fix for one, two, three or five years. Variable rates are currently similar. Fixing makes sense if you want certainty over repayments and believe rates are likely to rise or remain elevated. It's less useful if you expect to pay down the loan quickly, refinance within two years, or hold irregular savings that you want to offset.

Fixed loans typically restrict additional repayments to $10,000 or $20,000 per year without penalty, and do not allow redraw or offset. If you're a couple in South Hobart expecting a windfall from a property sale or inheritance in the next 18 months, locking the full loan amount into a three-year fixed term may leave you paying break costs or unable to access those additional funds once deposited.

What is a split loan and when does it suit your situation?

A split loan divides your total borrowing into two portions, one fixed and one variable. You might fix 50% at 6.10% for three years and keep 50% variable at 6.20% with an offset account attached to the variable portion. This structure gives you rate certainty on half the loan and flexibility on the other half.

In our experience, a split works well when you have regular savings or rental income you want to park in an offset, but also want protection against rate rises on a portion of the debt. A buyer in Battery Point borrowing $650,000 might fix $325,000 and leave $325,000 variable with offset. If they keep $40,000 in the offset, the effective rate on that variable portion drops below the fixed rate, and they're still protected from upward movement on the fixed half.

What does portability mean and how does it protect you during an upgrade?

Portability allows you to transfer your existing loan to a new property without breaking the contract or paying discharge fees. This feature matters most if you're buying in an area like West Hobart or North Hobart where you expect to upgrade within three to five years as equity builds or family needs change.

Not all lenders offer portability, and those that do may impose conditions. Some require you to settle the new property before discharging the old one, which creates a bridging period. Others allow a gap of up to 90 days. If you fix a rate at 5.90% for five years and want to upgrade two years later, portability lets you take that rate with you to the new property instead of paying break costs, which can run to tens of thousands depending on how far fixed rates have fallen since you locked in.

How do rate discounts work and what affects the size of the discount you're offered?

Lenders calculate rate discounts based on the amount you're borrowing and your loan-to-value ratio. A loan with an LVR below 70% typically attracts a larger discount than a loan at 85% LVR. If you're borrowing above $500,000, some lenders offer tiered discounts that reduce the margin they charge over the base rate.

A borrower in Sandy Bay refinancing a $750,000 loan at 65% LVR might be offered a discount of 0.90% off the standard variable rate, bringing the rate from 6.80% down to 5.90%. The same borrower at 80% LVR might receive only 0.60% off. Rate discounts are also affected by whether you're an owner-occupier or investor, and whether you choose principal-and-interest or interest-only repayments. Owner-occupied principal-and-interest loans attract the lowest rates.

Should you compare loans using a comparison rate or calculate actual repayment scenarios?

The comparison rate includes the interest rate and most ongoing fees over a standard 25-year loan term. It's a useful starting point, but it assumes you borrow exactly $150,000 and make no additional repayments or changes to the loan. Most buyers in Hobart borrow more than that and either refinance or adjust repayments within five years.

You'll get a clearer picture by calculating what you'll actually pay over the period you expect to hold the loan. If you're borrowing $600,000 and plan to review your position in three years, work out the balance remaining after three years under each loan product, accounting for offset balances, monthly fees, and any annual package fee. This approach shows the real cost difference between products rather than a standardised figure that may not reflect your circumstances.

How does an offset account reduce the amount of interest you pay?

An offset account is a transaction account linked to your home loan. The balance in the offset is subtracted from your loan balance before interest is calculated each day. If your loan balance is $500,000 and you hold $50,000 in a linked offset, you're charged interest on $450,000.

This structure works well if you're self-employed, receive quarterly income, or regularly build savings between large expenses. A buyer in Glenorchy with a variable loan at 6.15% and $40,000 in offset saves around $2,460 in interest over the first year compared to having that $40,000 in a separate savings account earning 4.5%. The offset delivers a return equal to the loan rate, which is higher than the rate on most deposit accounts and is not taxed because you're reducing interest charged rather than earning interest income.

What's the difference between principal-and-interest and interest-only repayments?

Principal-and-interest repayments reduce your loan balance each month. Interest-only repayments cover the interest charge only, leaving the loan balance unchanged. Interest-only periods typically run for one to five years, after which the loan reverts to principal and interest.

Interest-only makes sense for investors who want to maximise tax deductions and preserve cash flow, or for buyers who expect a lump sum from a sale or inheritance within the interest-only period and plan to pay down the loan at that time. For an owner-occupied home loan in Hobart, sticking with principal and interest from day one builds equity faster and reduces the total interest paid over the life of the loan.

Choosing a loan means balancing rate, features, fees and flexibility

Call one of our team or book an appointment at a time that works for you. We'll pull current rates from lenders across the panel, calculate the cost of each product based on your deposit and property type, and walk through which structure gives you the outcome you're after without locking you into features you won't use.

Frequently Asked Questions