Not all home loans are the same. Understanding the different types helps you choose the right loan for your situation.
Variable Rate Loans
The interest rate moves up and down with the market.
Pros:
- Rates can go down
- Usually more features (offset, redraw)
- Unlimited extra repayments
- No break costs to refinance
Cons:
- Rates can go up
- Less payment certainty
Fixed Rate Loans
The interest rate is locked for a set period (usually 1-5 years).
Pros:
- Payment certainty
- Protection from rate rises
- Easier budgeting
Cons:
- Miss out if rates drop
- Break costs if you exit early
- Limited extra repayments
- Fewer features
Split Loans
Part fixed, part variable—the best of both worlds.
Example: 50% fixed at 6.2% for 3 years, 50% variable at 6.5%
You get some rate protection while maintaining flexibility on the variable portion.
Key Features Explained
Offset Account
A savings account linked to your loan. Your savings balance "offsets" your loan balance, reducing the interest you pay.
Example: $500,000 loan with $50,000 in offset = interest charged on $450,000
Redraw Facility
Allows you to withdraw extra repayments you've made. Similar to offset but the money sits in the loan itself.
Offset vs Redraw
For owner-occupied loans, offset and redraw achieve similar results. For investment properties, there can be tax implications with redraw—ask your accountant.
Extra Repayments
Paying more than the minimum reduces your loan faster and saves interest. Variable loans typically allow unlimited extra repayments; fixed loans may have caps.
Repayment Holidays
Some loans allow you to pause repayments temporarily (if you're ahead). Useful for parental leave or between jobs.
Which Loan Type Suits You?
- Variable: Best for flexibility, those who may refinance, or expect rates to fall
- Fixed: Best for certainty, tight budgets, or expecting rate rises
- Split: Best for those who want balance between certainty and flexibility
Next Steps
- Use our repayment calculator to compare options
- Book a consultation to discuss what suits you
