Choosing a home loan isn’t just about rates or features. Different loan types behave differently over time, affecting your repayments, flexibility and how your loan fits into your wider financial picture.
Let’s break down the most common home loan types and features in plain language. You’ll learn how variable, fixed and split loans work, what specialised options are designed for, and how features like offset accounts, redraw and repayment options can influence the cost and flexibility of your loan.
And if at any stage you are unsure what loan suits you best, reach out to our team of lending specialists. That’s what we’re hear for!
A variable rate loan has an interest rate that can move up or down over time depending on the rate set by the Reserve Bank of Australia, funding costs and the lender’s decisions. Your repayments generally pay off both the interest and some of the principal.
Typically used when
You want flexibility, including the ability to make extra repayments or access redraw.
Things to be aware of
Repayments can increase if interest rates rise, so it’s important to allow for changes in your budget.
A fixed rate loan locks in your interest rate for a set period, usually between one and five years. Repayments stay the same during this time. At the end of the fixed period you can decide whether to fix the rate again or move to a variable loan.
Typically used when
You want certainty and predictable repayments for a period of time.
Things to be aware of
Fixed loans can limit flexibility. Extra repayments, refinancing or exiting early may involve fees.
A split loan combines both fixed and variable portions within the same loan.
Typically used when
You want a balance between certainty and flexibility.
Things to be aware of
You’ll need to decide how much of your loan to fix and how much to keep variable, which should align with your cash flow and comfort with risk.
With an interest-only loan, you pay only the interest on the loan for an agreed period. After this ends, repayments increase as you start paying down the principal.
Typically used when
Often used by investors or borrowers who want lower repayments in the short term.
Things to be aware of
Because the loan balance doesn’t reduce during the interest-only period, total interest costs are usually higher over the life of the loan.
A line of credit allows you to draw funds up to an approved limit and repay them over time, similar to a revolving facility secured against property.
Typically used when
You want ongoing access to funds or flexibility to manage cash flow.
Things to be aware of
Without clear boundaries, balances can remain high for longer, increasing interest costs.
Some home loans are designed for specific circumstances rather than everyday borrowing needs.
Introductory / honeymoon loans offer a discounted interest rate for an initial period, usually 6 to 12 months, before reverting to a standard rate.
Low doc loans are designed for borrowers who don’t meet standard income documentation requirements, often self-employed or casual workers, and typically come with higher rates or stricter conditions.
Understanding loan types and features is a good first step. Working out how they apply to your income, goals and next move is where things usually get clearer.
We can help you make sense of the options and talk through what would suit your situation, without pressure or obligation.
Loan features determine how flexible your loan is, how easily you can access funds, and how much control you have over repayments and interest costs over time. Not every feature is available on every loan, and availability depends on lender criteria and individual circumstances.
Extra repayments allow you to pay more than the required minimum repayment. Any extra amount is usually deducted from the principal, which can reduce the interest paid over the life of the loan.
Even small, regular extra repayments can help you pay off your loan sooner.
Most lenders allow you to make repayments monthly, weekly or fortnightly. Weekly or fortnightly repayments can suit people who are paid more frequently and may help reduce interest over time by increasing repayment frequency.
Repayments are usually made via direct debit from a nominated bank account. As long as sufficient funds are available, this helps ensure repayments are made on time without the need to manually transfer funds.
A redraw facility allows you to access extra repayments you have already made on your loan.
This can provide flexibility and peace of mind. Some lenders charge redraw fees, set minimum redraw amounts or restrict when funds can be accessed.
An all-in-one loan combines a home loan with a transaction, savings and credit card account. Your income can be paid directly into the loan.
Keeping money in the account for as long as possible each month can reduce interest charges. These loans often require careful management and may have higher interest rates.
An offset account is a savings account linked to your home loan. The balance of the offset account is deducted from your loan balance when interest is calculated.
This can reduce interest costs while still allowing you to access your savings. Offset accounts may come with higher fees or minimum balance requirements.
Some lenders offer discounted interest rates and fees on loans above a certain value when bundled with other banking products.
These packages can be cost-effective if you use the included services, but may not suit everyone.
A portable loan allows you to transfer your existing loan to a new property if you sell and buy.
This can save time and setup costs, although fees or conditions may still apply.
Some lenders allow borrowers to temporarily pause repayments or make reduced repayments for an agreed period.
By now, you’ve seen how different loan types and features work. The next step is bringing it all together and understanding what makes sense for you, today and longer term.
A conversation can help turn information into clarity, and options into a plan that supports where you’re heading.
Fill in the form and speak with a lending specialist today!