Variable rate loans, fixed rate loans, principal and interest loans, and interest only loans – there's quite a few choices when it comes to home loans. But which one’s right for you?
Let's walk you through the different home loan types and their repayment options. Find out how they might work for you and your financial situation, and what you need to consider.
4 minute read
With a variable rate loan, the rate can go up and down with the current interest rates. This means your repayments can go up and down too.
If you’re worried about the impact of fluctuating interest rates on your ability to pay your loan, a fixed rate loan may better suit your needs. Your repayments are locked in, based on an interest rate that’s fixed for an agreed term (one to five years).
Essentially, you’re opting for certainty over flexibility with a fixed rate loan – with peace of mind knowing exactly what your repayments will be.
This means having the certainty of a fixed rate on the fixed rate part of your loan, plus flexibility on the variable rate part of your loan.
Our Home Lending Specialists can help you decide if splitting your loan is right for you.
If you make principal and interest repayments, you’ll pay down both the loan amount (the principal) and the interest. Otherwise, you can request to repay the interest only for a set period – usually one to five years. No matter which repayment option applies to your loan, the length of the loan remains the same.
This means making repayments on both the loan amount (the principal) and the interest. While your initial repayments are higher than interest only repayments, the main benefits include:
For these reasons, we recommend chatting to your financial advisor before you decide on interest only repayments.
Second home, third home or even more homes? If you're buying an investment property, you'll need an investment home loan that's suited to your needs. Keep in mind that different interest rates will usually apply.
If you're building a home, you'll need to take out a construction loan to make progress payments during different stages of the build.
Once you have a home loan, you can redraw any extra home loan repayments down the track for things like renovations (non-structural), investments or expenses you didn’t see coming.
We take care of all the BS (bank stuff) so you can access the knowledge you need to make informed decisions. When we write a guide or article, we take steps to make sure the information is relevant, accurate and most of all, helpful.
Talk to a Home Lending Specialist – when and where it suits you.
Lending and eligibility criteria, and fees and charges, apply for our home loans. The Complete Home Loan Package consists of an eligible home loan, one optional eligible credit card per customer and up to nine optional Offset Transaction Accounts per loan.
The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.