Home Loan Types Explained —
Which One Suits You?

Variable rate loans

Variable rate loans are the most widely held loan type in Australia. Your interest rate moves with the market, rising and falling as the Reserve Bank adjusts the cash rate. Variable loans offer the most flexibility — extra repayments, redraw facilities, and offset accounts are commonly available. The trade-off is that your repayments can increase when rates rise, making budgeting less predictable.

Fixed rate loans

Fixed rate loans lock your interest rate for a set period, typically one to five years. Your repayments will not change during the fixed term, regardless of what the market does. This gives you certainty and makes budgeting simple. However, you generally cannot make significant extra repayments, offset accounts are rarely available, and if you break the loan early, substantial break costs may apply. At the end of the fixed period, the loan reverts to a variable rate.

Split loans

A split loan divides your borrowing between fixed and variable portions. You get some certainty from the fixed component while retaining flexibility on the variable portion. This is a practical middle ground for borrowers who want to hedge their position without committing entirely to one structure.

Interest-only loans

With an interest-only loan, you pay only the interest for a set period. This produces lower monthly repayments but your loan balance does not reduce. Interest-only is popular with property investors for cash flow and tax reasons, but it costs more over the life of the loan. Read more about interest-only vs P&I for investors.

Low-doc loans

Low-doc loans are designed for self-employed borrowers who cannot provide standard income verification like payslips. You typically self-certify income or provide BAS statements. Rates are higher and larger deposits are usually required, but these loans provide access to finance that would not otherwise be available.

Read our full guide to how home loans work for the complete picture on loan features, assessment, and the application process.

Frequently asked questions