Checklist: How to choose a home loan

Simply, it means your rate won’t change for a period of time, and you’ll know exactly what your regular repayments will be. There might be break costs if you choose to break the loan during the fixed period. Chat to your lender or broker about the specifics.

This means the rate can go up and down, and your repayments can vary. Generally, variable rate loans tend to offer more flexible features than fixed rate loans, like letting you make as many extra repayments as you want and redrawing those extra repayments easily online. Chat with your lender or Broker about particular loans and their features.

You can split your loan into multiple loans that come with variable and fixed rates. This means having the certainty of a fixed rate plus the flexibility of a variable rate loan.

Different rates usually apply to loans for a home to live in and loans for an investment purpose.

This means you’ll need to take out a construction loan and make progress payments during the build.

This is a bank account that’s linked to your home loan. The more money you keep in there during the month, the more home loan interest you could save.

Keep in mind that, generally, fixed rate home loans can have limitations on the amount of home loan interest you could save with an offset account.

This means you can redraw your extra home loan repayments down the track for things like renovations, investments or expenses you didn’t see coming.

Check if you can choose your repayment frequency. Why? The ability to make weekly or fortnightly repayments, instead of monthly, can help you save more on home loan interest – and potentially reduce the time it takes to pay off your mortgage in the long run.

That’s because interest is calculated daily on your balance and raised monthly on your due date. Splitting your monthly repayments into two fortnightly or four weekly repayments means they’re more frequent, so the balance we calculate your interest on every day will be lower. Keep in mind that the number of weeks or fortnights in a month can vary.

This means you pay down both the loan amount (the principal) and the interest. Interest only repayments, on the other hand, only pay off the interest on your home loan. You can only make interest only repayments for a set period – usually one to five years.

The more you pay off, the less interest you’ll be charged on your home loan. Some home loans let you make unlimited extra repayments, while others might let you make a certain amount each year.

This is relevant because:

• Rates can differ depending on how much of the property value you need to borrow – also known as Loan to Value Ratio (LVR).
• You’ll need to pay Lenders’ Mortgage Insurance (LMI) if you need to borrow more than 80% of the property value – this is an insurance that’s applied to your home loan to protect your lender.