There are many types of home loans available. It can be confusing. The best way to approach choosing one is to think about your own individual spending habits, your financial goals or priorities - and even how you think the Australian economy is performing.
It’s all about choice: what’s right for you.
Here’s a simple guide to the different types of loans, their strengths and weaknesses, and what extra features to consider. Use our comparison rate schedule to see all the features of each of our loans.
Fixed rate home loans
A fixed rate home loan means exactly that: the interest rate is fixed for between 1 and 3 years.
This provides the peace of mind of knowing exactly what you will be paying over the life of the fixed period. No surprises.
If interest rates go up, you’ll be protected. If they go down, you may end up paying more than you would with, say, a variable rate. You’ll need to make a decision on what the economy is going to do, and how you want to manage your repayments. Investors tend to fix their loans so they can match their repayments with their rental income.
One major restriction with fixed rate loans is you are unable to make additional repayments. There are also costs associated with breaking a fixed rate term.
Find out more about our fixed rate loans.
Variable rate home loans
A variable rate home loan means your interest rate can go up and down, in line with the economy.
These types of loans are much more flexible with more options than other loans - such as making additional repayments, and redraw.
Of course, if rates go up, so will your repayments. However, if rates go down, so will yours. Again, you will have to make a decision on what the economy is doing and which way it is moving.
We have a great variable rate home loan: find out more here.
Split rate home loans
A split rate loan could be considered the best of both worlds. Part of your loan:
- is on a fixed interest rate. This provides some peace of mind.
- is on a variable rate, providing flexibility and options on that component.
We have a great split loan option - find out more here.
Other features to consider
Redraw
Redraw allows you to withdraw any extra repayments you have made on your variable home loan. There are no fees and no minimum redraw amount, as long as your loan remains one payment in advance.
Repayment Pause
A repayment pause provides you with the option to pause your variable home loan repayments in the event of legitimate leave from work. This may include maternity leave or the requirement of care for a sick child, partner or parent.
Flexible repayments
Flexible repayment provides you with the ability to structure your repayments on either a weekly, fortnightly or monthly basis, depending on your preference or pay cycle.
Portability
Portability allows you to keep your current loan when you sell and purchase another property saving you time and money in establishing a new loan.
Additional repayments
Additional repayments on variable rate loans with no extra charge allow you to allocate any spare cash to your mortgage and reduce interest payable. Works in accordance with redraw.
Switch
You can switch your home loan to suit your current needs. For example if the interest rates are rising regularly you may consider switching all or part of your loan from a variable interest rate to a fixed interest rate.
Top-up
You can top-up or apply for an equity loan to renovate or consolidate debt such as car loans, credit cards and store cards.