Sydney new-build flat: comparing a 7.78% 30-year fixed mortgage

[loft.balanced]

Getting this comparison wrong could leave me with an affordable-looking rate but an expensive or inflexible loan. I am seeking finance for a Sydney new-build flat costing about A$1,110,000, and the current quote is 7.78% on a 30-year term. Once the fees and the applicable LTV band were included, the cheaper advertised figure stopped being a useful guide.

Should I rank the offers by APR, by interest during the relevant comparison period, or by every cash payment and fee over that period? I also want to test the monthly repayment without assuming future rate cuts or an easy refinance. Portability and early-repayment conditions matter, but I am unsure how much value to assign them until I see the precise wording.

 

[readThePaper]

Before choosing a lender, choose the comparison horizon. A loan that is cheaper for the first few years can become the worse option if you retain it, while a full 30-year calculation may give too much weight to costs you never incur.

I would build two cases. If you expect to move or refinance within a defined period, add the repayments, initial charges and any exit cost up to that point. If there is a realistic chance you must keep the mortgage, run the same calculation over the longer term. The missing inputs are the loan amount and LTV, plus written confirmation of whether 7.78% applies for all 30 years or only an initial fixed period.

 

[paintsAndKey]

The realistic holding-period comparison is useful, but it can make an expensive loan look better if the spreadsheet assumes an easy refinance. I’d run at least two versions: one where refinancing is available on acceptable terms, and one where you must keep this mortgage much longer.

For a new-build flat, I’d also want the portability wording and early-repayment conditions in writing before giving much weight to either feature. Most importantly, test whether the monthly payment remains comfortable without relying on future rate falls.