Types of Home Loans


There are various types of home loans now available for Australian home buyers.  The most common and widely used home loans are breifly described below.

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Standard Variable Rate Home Loans


As the name suggests, the interest rate can vary, up or down, which in turn means that your repayments will rise or fall in line with the interest variation.  This is probably the most common home loan and often provides many features including the ability to make extra repayments, either as a lump sum or via regular increased monthly repayments.  Other features typically include a redraw faciltity and/or offset account. The maximum loan term is normally 30 years although a couple of lenders allow terms of 40 years depending on certain cirteria being met.

Fixed Rate Home Loans

Again, as the name suggests, the interest rate for these loans is fixed for the period chosen.  Fixed rate periods are ordinarily 1, 2, 3, 4 or 5 years. Some lenders offer fixed periods up to 10 and sometimes 15 years.  The advantage of fixed rate loans is that you can be certain of the monthly repayment amount for the duration of the fixed period.  For further details on fixed rate loans, please go to Things you should know.

Basic Variable Home Loans

The Basic variable home loan is a variable loan without a lot of the features that come with a more fully featured standard variable home loan.  If you are looking for a loan but don't require the "bells and whistles" a basic home loan may suit your needs.  The interest is lower and the ongoing fees can be down to zero.  Invariably you are still allowed to make extra repayments as with a standard variable home loan and redraw facilities are commonplace now.

Introductory Rate Home Loans

These loans offer a discounted rate for an initial period, somewhere between 6 months and 3 years.  You may have heard the term "honeymoon" loan as they are sometimes referred to as. After the inital period the interest rate reverts back to the prevailing standard variable rate.  This type of loan may suit those who are looking for lower repayments in the early stages of the loan.

Line of Credit Loans

A Line of Credit is a flexiable pre-approved loan that you can access all at once or as you need it.  Once approved you can use it for personal or investment purposes. You can access funds up to the credit limit, even after you have paid some or all of it off.  Unlike conventional loans you are normally only required to make monthly repayments to cover the interest.  Lines of credit are useful for those with invesment properties to cover the capital and maintenance expenses.

Your broker can discuss the loan options with you to see which type of loan suits your siuation best.