Types of home loans

Variable, fixed, reverse mortgage, interest only – there’s so much choice when it comes to home loans, but which one’s right for you?

Here, we walk you through the different home loan types – how they might work for you and your financial situation, and what you need to consider.

Variable rate home loans

With a variable rate loan, the rate can go up and down. This means your repayments can vary.

Benefits of our variable rate home loans:

Things to consider:

  • Your loan repayments could increase if your interest rate increases
  • Variations in your repayments make it harder to budget.

Fixed rate home loans

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 – peace of mind knowing exactly what your repayments will be.

Benefits of our fixed rate home loans:

  • Your repayments are protected against future rate changes for a fixed period
  • Fixed repayments make it easier to budget
  • 40% offset account available to help you save on home loan interest
  • You can make extra repayments of up to $10,000 each year to help reduce your loan term
  • Redraw your extra repayments if you need – note that fees may apply.
  • You can opt to pay interest only for a period of time
  • Unless you’re making monthly interest only repayments, you can choose to make weekly, fortnightly or monthly repayments.

Things to consider:

  • You won’t benefit from lower repayments if rates fall
  • Break fees may apply if you decide to break the loan during the fixed period
  • At the end of the fixed rate period, you may be able to fix a new rate for a further period, or your home loan will revert to the standard variable rate.

Splitting your loan between variable and fixed

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 Finance Managers can help you decide if splitting your loan is right for you.
 

Reverse mortgages

What’s a reverse mortgage?

A reverse mortgage lets you access funds using the equity you’ve built up in your home as security.

Benefits of our reverse mortgage - the Seniors Equity Release Home Loan:

  • Take the money as a lump sum or make smaller withdrawals when needed
  • You could use the money to supplement your retirement income
  • No repayments are necessary for the life of the loan. All the principal, interest, fees and charges are typically repaid when your house is sold or estate settled. You can, however, make repayments at any time
  • If the value of your home falls, our No Negative Equity Guarantee ensures that you or your estate won’t have to cover the difference between the market value and what is owed.

Things to consider:

  • You need to be 65 years or over and own your property outright
  • You’ll be charged interest on the money you borrow. Typically, you’re charged a higher interest rate on a reverse mortgage than a standard home loan. Use ASIC’s reverse mortgage calculator to see how much your debt may increase over time and how interest rate changes and house prices could affect the equity in your home
  • The loan may impact your eligibility for the pension.

There are other factors to consider and it’s important to seek independent financial and legal advice before deciding to apply for a reverse mortgage. Find out more about reverse mortgages and what you need to consider.

Interest only home loans

An interest only mortgage limits your monthly repayments to just the interest for an agreed period of time – usually one to five years.

Benefits of making interest only repayments

  • Making smaller repayments can free up your cash flow so you can redirect your money to other investments, or pay for short term expenses like parental leave or education costs
  • Potential tax and gearing benefits if used as part of your investment property strategy.

Things to consider:

  • The principal amount of the loan (the amount you borrowed) will not reduce during the interest only period, so you’ll have to start paying it off when your interest only term is up
  • You’ll end up paying more interest over the loan term. This is because you’ll be charged interest on the full loan amount (principal) for longer, as it hasn’t been paid off. What’s more, higher interest rates may apply if you’re choosing an interest only repayment option
  • When the interest only period ends, your repayments will be higher because you’ll have a shorter term remaining to pay off the full loan amount.

Make sure your future finances can support your repayments. Take a look at our home loan repayments calculator to get an idea of what your monthly repayments could be.

It’s important to speak to your financial adviser before you decide to apply for an interest only home loan.

Making principal and interest repayments

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:

  • Lower interest rates than an interest only home loan
  • Lower average repayments over the life of the loan
  • You’re paying down the principal and building up your equity from day one.

Find out more about the reasons to pay principal and interest.

Find a home loan to suit you

Browse our range of home loans.

Equaliser Home Loan

A home loan rate lower than the average standard variable rates of ANZ, NAB and Westpac for the first three years.

Complete Home Loan Package

A Complete home loan, eligible credit card and offset account for one annual package fee. Variable and fixed loan options available.

Variable Rate Home Loan

Offering our discounted variable rate, the Premium Select Home Loan currently has a $0 application fee.

Fixed Rate Home Loan

Lock in your interest rate for one to five years.

Seniors Equity Release

Unlock the equity in your home and make no repayments for the life of the loan.

Need help choosing a loan?

Get in touch with one of our Home Finance Managers, and they'll respond within one business day. 

Things you should know 

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.