HOME LOAN TYPES

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VARIABLE

Variable interest rates can fluctuate over time.  If rates move up or down, your loan interest rate will adjust accordingly. Generally, interest rate movements are determined by the Reserve Bank, however, lenders have recently started independently raising their interest rates for varying economic reasons.  Variable loans usually allow you to pay additional repayments, and there is less risk of penalties if the loan is paid out early.

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FIXED

Fixed interest rates are locked in for a set period of time, usually between one and five years.  If interest rates move up or down, your interest rate is secured.  Fixed rate loans can have a downside – you’re limited in making additional repayments (if any), and you may also have to cover potential break costs if the loan contract is paid out during the fixed rate term. 

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SPLIT LOAN 

A split loan gives you the option to fix part of your home loan and leave the other part variable.  Having part of the loan variable means you can still make extra repayments without being penalised on the variable portion, and gives you peace of mind on the fixed portion, knowing the rate won’t change.  Many people tend to go with a split loan to manage some of the risks if interest rates rise.  

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PROFESSIONAL PACKAGES 

Most professional packages come with an annual fee.  In return, the lender will provide a significant discount on the interest rate, as well as other products, such as fee free offset accounts, reward credit cards and discounts on insurance products. 

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BASIC LOANS

Generally, basic loans are variable loans, but without the frills.  They may offer an introductory rate, and there are usually no application or ongoing fees.  Basic loans don’t offer as much flexibility as professional packages, such as offset and free redraw.

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