Variable Rate Loan
Interest rates fluctuate based on market changes, offering flexibility with features like redraw and offset accounts.
Best for: Borrowers seeking flexibility and extra features.
Example: Your monthly repayments may decrease if the Reserve Bank lowers interest rates.
Interest Only Loan
Repayments only cover the interest for a set term. The loan principal does not reduce during this period.
Best for: Property investors looking to maximize tax deductions or temporarily lower costs.
Example: Lowering your monthly commitment for the first 5 years of an investment loan.
Loan Types Explained
Understanding the different types of loans available can help you make an informed decision for your financial future. Here is a breakdown of the most common options.
Fixed Rate Loan
Interest rate is locked for a set period, providing certainty with repayments that stay the same regardless of market shifts.
Best for: Budget-conscious borrowers who want repayment certainty.
Example: Locking a 3-year term at 5.5% ensures your repayment remains constant even if rates rise.
Principal & Interest
Repayments cover both the interest and a portion of the original borrowed amount, gradually building equity.
Best for: Long-term homeowners who want to pay off their debt and own their home sooner.
Example: Your loan balance decreases every month as you pay down the borrowed sum.
Split Rate Loan
A hybrid option where a portion of the loan is fixed and the remainder is variable, balancing stability and flexibility.
Best for: Borrowers wanting the best of both fixed and variable worlds.
Example: Splitting a $500k loan into $300k fixed for security and $200k variable for offset benefits.
Offset Account Loan
 The balance in this account reduces the interest charged on your mortgage amount.
Best for: Borrowers with savings who want to save on interest while keeping their cash accessible.
Example: Having $50k in an offset account for a $500k loan means interest is only calculated on $450k.