Loan Types Explained

Your Key Finance breaks down different loan structures and who they’re best for, helping you navigate the mortgage landscape with clarity and confidence.

Variable Rate Loan

Interest rates fluctuate with market changes, offering flexibility with features like redraw facilities.

Good for: People who want flexibility and access to features like redraw and offset.
Example: You expect interest rates may fall in the future and want the flexibility to make extra repayments.

Fixed Rate Loan

Interest rates are locked for a specific period (1-5 years), providing certainty in repayments.

Good for: People who want certainty in their repayments.
Example: You prefer knowing exactly what your repayments will be for the next few years.

Split Rate Loan

Combine both fixed and variable features, balancing stability with flexibility.

Good for: People who want a mix of certainty and flexibility.
Example: You fix part of your loan for peace of mind and keep part variable to access extra features.

Interest Only Loan

Principal & Interest

Standard structure where you pay both interest and a portion of the loan balance.

Good for: Homeowners who want to pay off their loan faster.
Example: You're buying your family home and want to steadily reduce your debt over time.

Offset Account Loan

Repayments only cover the interest for a set term, rather than the principal amount.

Link a savings account to your loan; interest is only charged on the difference.

Good for: Many property investors looking to reduce repayments initially.
Example: You want lower repayments in the short term while holding an investment property.

Good for: People who keep savings in the bank and want to reduce the interest they pay without locking their money away.
Example: You have a $500,000 home loan and $20,000 in your offset account. Instead of paying interest on the full $500,000, your lender only charges interest on $480,000. Your $20,000 remains available to spend whenever you need it, while continuing to reduce the interest you pay for as long as it stays in the account.