Understanding the different types of home loans can be confusing, especially for first home buyers.
We’ve outlined the differences to help you determine the most suitable home loan type for you.
What is a variable home loan?
Variable home loan rates can change over time and are determined by the official RBA cash rate, or your lender may change the rate. If interest rates decrease, you’ll enjoy a lower repayment amount, however, if interest rates increase, your repayments will also increase.
People choose variable home loans due to the flexibility; you can easily make extra repayments, add an offset account or redraw facility, or refinance.
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What is a fixed home loan?
Fixed home loans mean the interest rate is fixed for a set period between one and five years. Even if the official cash rate changes, your interest rates and repayments will remain the same for the set period.
The interest rate generally defaults to a variable rate once you reach the end of your fixed-term period, however, you have the option to fix it again on the current interest rate for up to five years, refinance, or roll onto a variable rate.
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What is a split home loan rate?
You might decide a split rate home loan would suit you best. A split rate home loan allows you to split the total loan value into two loans, one fixed and the other variable.
Essentially, this gives you the best of both worlds so you can have the option to make extra repayments on your variable loan but also know your fixed home loan won’t be affected by changes in rates.
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Find out how much you can borrow with our home loan borrowing power calculator.
If you need assistance with your home loan enquires, find your local lender on our website, call us on 1300 228 228, or visit your local branch today.