How to Get the Cheapest Home Loan: It Comes Down to Your 4Cs
Most people think the cheapest home loan comes from picking the right bank. It doesn’t. Lenders save their sharpest rates for borrowers who look like the lowest risk. They judge that risk on four things, called the 4Cs of credit.
Once you know where you stand on each one, you know what rate you can really get, and what it would take to get a better one.
Getting a home loan is a negotiation
Think of it as a tug of war. The lender wants as little risk as possible. You want the biggest loan at the lowest rate. Every loan lands somewhere in between.
The borrowers who win that tug of war aren’t lucky. They know what the lender is looking for, they arm themselves with information, and they show up prepared. That’s why two people can walk into the same bank on the same day and be offered very different rates.
The 4Cs of credit, explained simply
1. Character: who is going to be paying?
Lenders look at your credit score, your repayment history and how you’ve run your accounts. They also notice the little things, like how long you’ve been in your job, how many credit enquiries you’ve made in the last two years, and any company directorships on your file. A clean record opens the door to the best pricing.
Quick win: get a free copy of your credit report and fix any mistakes before you apply. Read more about credit scores and your rate.
2. Capacity: is there enough cash to pay?
This is your income, your living costs and your other debts. Lenders test your repayments at a rate well above what you’ll actually pay. Unused credit card limits, car loans and buy now pay later accounts all count against you, even if you never use them.
Quick win: close or reduce credit card limits you don’t need. Read how lenders work out what you can borrow.
3. Capital: what does the lender get if things go wrong?
This is your deposit or equity, and the property itself. Lenders often have cheaper rate tiers once you borrow less than 80%, 70% or 60% of the property’s value. The type of property matters too. Small units, studios and serviced apartments are often treated differently, with fewer lenders or a lower maximum loan.
Quick win: if your home has gone up in value, ask for an updated valuation before you compare rates. Keep a list of any improvements and receipts to back it up. Read how equity and LVR can lower your rate.
4. Conditions: what’s happening in the wider world?
This is the common-sense check. Interest rates, the property market, the economy and each lender’s appetite all change over time. Rates have gone up several times this year, and lenders regularly change their rules on buffers, property types and who they want to lend to.
Quick win: you can’t control conditions, but you can pick a lender whose current rules suit you. A broker sees those changes across dozens of lenders every week. Read whether to refinance when rates are rising.
Are you Credit Ready? Find out where you sit
Lenders weigh up two big questions first. Are you willing to repay (your Character and credit score)? And are you able to repay (your Capacity)? Put them together and every borrower lands in one of four boxes.
| Lower capacity to repay | Higher capacity to repay | |
|---|---|---|
| Strong credit history | Likely: good record, tight budget | Strong: good record, comfortable budget |
| Weaker credit history | Weak: some marks, tight budget | Vulnerable: can afford it, but the file has marks |
Your Capital and current Conditions then fine-tune which lenders and rates are open to you.
What we do next, depending on your box:
- Strong: you’re Credit Ready. We find you the sharpest rate you qualify for.
- Likely: you’re close. We give you a simple 30 to 90 day plan to free up your budget, then compare.
- Vulnerable: we check your report for errors and look at which lenders suit you. Often the best move is to ask your current lender for a better deal while your file improves.
- Weak: it’s not the time to switch. We build a plan with you so you’re ready later.
The check takes about 15 minutes, it’s free, and there’s no obligation. Sometimes the honest answer is to stay where you are, and we’ll tell you if it is.
Already have a home loan? Your 4Cs may have changed
Rates have gone up several times this year. If your repayments have crept up and nobody has checked your loan, you could be paying more than you need to.
The good news is your 4Cs may look better than when you first borrowed. Your income may have grown. Your property may be worth more, which can move you into a cheaper rate tier. Banks often save their best rates for new customers, so loyal borrowers can end up paying a “loyalty tax”.
A Credit Ready Check shows whether refinancing makes sense for you now, what it would cost to switch, and what you’d save.
What "cheapest" really means
The lowest advertised rate isn’t always the cheapest loan. When we compare loans, we look at:
- The comparison rate, which includes most fees, not just the headline rate
- Annual and ongoing fees, especially on package loans
- Features you’ll actually use, like an offset account that could save you more than a slightly lower rate
- Switching costs, such as discharge fees, government fees and break costs on fixed loans
- Cashback offers, and the conditions and clawbacks that come with them
Our goal is the right loan at the sharpest rate you qualify for. Not just the lowest number on a website.
How it works
- Book a 15-minute call. By phone or video, at a time that suits you.
- We check your 4Cs. You send a recent loan statement or a few details, and we compare your position across 60+ lenders.
- You get your Credit Ready result in writing. Within 48 hours, with clear options and an honest recommendation.
Our service is free. Lenders pay us when a loan settles, and we’ll always tell you how that works.
Why talk to Awesome Lending Solutions?
Albert Waldron has been a mortgage broker since 2002 and has helped settle more than 1,000 loans. He founded Awesome Lending Solutions in Sydney in 2014 and works with a panel of 60+ lenders. Albert explains things in plain English, and he’ll tell you if you’re better off staying where you are.
Or call 02 7904 9560.
Frequently asked questions
What are the 4Cs of credit?
They’re the four things lenders use to decide whether to approve a loan and what rate to offer: Character (your credit history), Capacity (your ability to repay), Capital (your deposit, equity and the property itself) and Conditions (what’s happening in the wider market).
How do I get the cheapest home loan?
Improve your 4Cs where you can, then compare lenders whose pricing suits your situation. A lower loan-to-value ratio, a clean credit history and fewer debts usually unlock the sharpest rates.
Does my credit score affect my interest rate?
Yes, it can. Many lenders offer their best pricing to borrowers with strong credit histories, and some use risk-based pricing where a lower score means a higher rate.
Will a Credit Ready Check hurt my credit score?
No. The check itself doesn’t involve a credit enquiry. A lender only checks your credit file if you decide to apply.
Is the cheapest rate always the best loan?
Not always. Fees, features like an offset account and the comparison rate can make a slightly higher rate the better deal overall.
Should I refinance to get a cheaper rate?
It depends on your 4Cs, your switching costs and how long you plan to keep the loan. Sometimes asking your current lender for a better rate is the smarter move, and we’ll tell you if it is.
Does the Credit Ready Check cost anything?
No. Our service is free to you.
Albert Waldron is a Credit Representative (407514) of Australian Finance Group Ltd, Australian Credit Licence 389087. This is general information only and does not take into account your personal circumstances. Please seek advice before acting. Credit Ready Check is a free lending review, not a credit repair service.